Valued to be an approximately $242 million transaction, the new share price is a .15% increase from its previous listing, representing a 40% premium over a 60-day volume weighted average share price, as well as a 26.8% premium 30-day volume weighted average share price, according to a Union press release. This places the stock price up more than $3 since August.
Union Drilling is a company based in Fort Worth, Texas, and provides contract land drilling services and equipment to oil and natural gas producers. The company has been operating almost a decade longer than Sidewinder Drilling.
Headquartered in Houston, Texas, Sidewinder Drilling is a privately owned drilling company that owns and operates a fleet of land rigs targeting unconventional oil and gas resources nationwide.
GuruFocus listings indicate that Union Drilling has a Financial Strength rank of 4 out of 10, a Profitability and Growth rank of 3 out of 10, a P/E ratio of 92.6, a P/B ratio of a .8 and a P/S ratio of .6. It has a market cap of $138.8 million.
Additionally, Union has attained four severe warning signs on GuruFocus, indicating bankruptcy risks, cash flow divergence, per share revenue decline and long-term debt. It also has one medium warning sign that denotes a loss of operating income over the past three years.
“For the remainder of 2012, we are seeing moderate weakness in certain markets, but activity remains fairly stable,” Union President and CEO Christopher D. Strong said in a media release reporting Union’s 2012 second quarter results.
The report showed slight improvement compared to the company’s first quarter results, where Union reported a net loss in revenue of $2.2 million in the first quarter of this year, which is $.10 per share. The company reported $4.6 million net loss in revenue in last year’s first quarter.
Strong said that these losses accounted for reasons that included the shifting of rigs to oil and liquid plays, as well as the expenses incurred during the transitional months between jobs where rigs were idle.
The merger between Union and Sidewinder is a unanimous vote among Union’s Board of Directors, as well as Union Drilling stockholders representing 51% of the Union’s outstanding shares to vote in favor of the transaction.
“The acquisition of Union Drilling is strategically complementary for Sidewinder as it significantly increases our stake of operations, geographically broadens our exposure in the North American shale plays, meaningfully expands our customer base and provides substantial synergies,” Sidewinder Chairman and CEO, Jon Cole said in the release. “After we complete our acquisition of Union Drilling, we will have the scale and skilled workforce necessary to more effectively serve our customers in multiple geographies.”
Five days after the announcement of the merger, Guru investor Chuck Royce, of mutual fund company Royce & Associates, sold almost 950,000 of his shares of Union Drilling, an 85% reduction of his stake.
Other Guru trades of Union include Mario Gabelli of GAMCO investors, who currently holds 109,000 shares, and Steve Cohen of SAC Capital Advisors, who sold all of his shares at $6.48 per stock. Both trades were reported at the end of this year’s second quarter.