ISS Governance Services Recommends Bronco Drilling Shareholders Vote Against Proposed Merger with Allis-Chalmers Energy
06 August 2008 - 12:08AM
PR Newswire (US)
ISS Joins Large Shareholders, Proxy Advisory Firms and Wall Street
Analysts in View that Allis-Chalmers Merger in not in the Best
Interests of Bronco Shareholders GREENWICH, Conn., Aug. 5
/PRNewswire/ -- Wexford Capital LLC announced today that ISS
Governance Services ("ISS"), a leading proxy voting and corporate
governance firm, issued a report on August 4, 2008 recommending
that shareholders of Bronco Drilling Company, Inc. (Nasdaq/GM:
BRNC) vote AGAINST the proposed merger with Allis-Chalmers Energy
Inc. (NYSE:ALY). ISS believes that "based on the current share
price and the fixed exchange ratio, the current offer undervalues
BRNC." Their report further states: "In conclusion, given the
relatively restricted sale process; re-rating of the sector as
reflected in the significant share price increases and upward
revisions in EBITDA estimates for the peer group since announcement
of the initial merger transaction; valuation analysis which
indicates that BRNC's stand-lone value is greater than that implied
by the current offer price; and the fact that BRNC's stock price is
trading marginally above the offer price, we recommend shareholders
vote AGAINST the proposed merger transaction." ISS joins a growing
number of shareholders, proxy advisory firms and Wall Street
analysts that believe the proposed merger with Allis-Chalmers is
not in the best interest of Bronco's shareholders: -- On April 8,
2008, Third Avenue Management LLC, Bronco's largest shareholder and
the owner of approximately 23.4% of Bronco's common stock, wrote
Bronco's CEO & Chairman stating: "In light of our strong belief
in the future prospects of Bronco, we believe that the proposed
merger price is woefully inadequate. Without significant
improvement in the consideration being offered to Bronco's
shareholders, we believe that Bronco should remain a stand alone
company." (Third Avenue's letter was filed as an exhibit to its
April 8, 2008 Schedule 13D Amendment No. 2.) -- On July 29, 2008
Wexford Capital LLC, an owner of approximately 12.8% of Bronco's
common stock, wrote Bronco's board of directors reiterating its
opposition to the proposed merger. Wexford's letter stated: "Our
view that the Merger is not in the best interests of Bronco and its
shareholders is based on numerous facts. ... We believe the Merger
significantly undervalues Bronco. In our view Bronco should be
worth $25-30/share, a substantial premium to the approximately
$17/share value offered in the Merger." (Wexford's letter was filed
as an exhibit to its July 30, 2008 Schedule13D Amendment No. 1.) --
On April 25, 2008, Alpine Associates, an owner of approximately
6.1% of Bronco's common stock, wrote Bronco's board of directors
advising them of Alpine's objection to the proposed merger,
stating: "we believe that the price being offered to Bronco's
shareholders by Allis-Chalmers is inadequate." (Alpine's letter was
filed as an exhibit to its April 25, 2008 Schedule 13D Amendment
No. 1.) -- On July 30, 2008, Proxy Governance Inc., an independent
proxy advisory firm, issued a report recommending that Bronco
shareholders vote against the proposed merger with Allis-Chalmers.
The report concluded: "We do not support this proposal because - in
the context of share price appreciation for peers in the period
since the announcement - it does not appear to offer a meaningful
takeover premium, and because the share price itself - which is
currently at a premium to the proposed merger consideration - seems
to bolster the arguments of large shareholders that the deal
undervalues the company." -- On August 5, 2008, FBR Capital Markets
issued a research report on Bronco Drilling stating: "We reiterate
our Outperform rating and $22 comparable multiple-derived price
target due to a strong underlying land rig market, and our
expectation that fewer than 50% of BRNC's shareholders will vote
for the ALY merger agreement. Such a rejection of the current deal
should allow the market to recognize the value of BRNC that has
been capped by the under-priced ALY offer." -- On August 5, 2008,
Jefferies & Company, Inc. issued a research report on Bronco
which stated: "Given the dramatic improvement in land rig
fundamentals this year, we generally agree with the dissenting
shareholders that the ALY transaction undervalues the Company." --
On August 5, 2008, Morgan Keegan & Co. Inc, issued a research
report on Bronco Drilling stating: "BRNC as stand-alone likely to
benefit from improving US land rig dayrates and utilization and
expansion into Mexico ... stock performance tied to ALY pending
shareholder vote Aug. 14th - recent shareholders publicly voicing
displeasure with the new deal terms and proxy services urging a
vote against the merger suggest deal may now be less likely." -- On
August 5, 2008, BMO Capital Markets issued a research report on
Bronco, stating: "we continue to believe that the Allis-Chalmers
offer price undervalues Bronco as a stand-alone entity,
particularly given the recent weakness in Allis-Chalmers' stock,
Bronco's new Mexico platform and the improvement in the U.S. land
drilling market over the last several months." About Wexford
Capital Wexford Capital LLC is an SEC registered investment advisor
with over $7 billion of assets under management. Wexford, which was
founded in 1994, manages a series of hedge funds and private equity
funds from its Greenwich, CT headquarters. For more information
about Wexford, visit the company's website at
http://www.wexford.com/. Forward Looking Statements Forward looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, are statements regarding expectations and
projections. All statements that do not concern historical facts
are forward- looking statements. Any statement that expresses or
involves a prediction, expectation, belief, plan, projection,
objective, goal, assumption or future events or performance is a
forward looking statement. Forward looking statements may be
identified through the use of words such as "expects", "will",
"anticipates", "estimates", "believes", or that by statements
indicating certain actions "may", "could", "should" or "might"
occur, this by no means is a complete list of words used in respect
to forward looking statements. Forward looking statements are
inherently uncertain, and actual results may differ, and may differ
materially, from the expectations expressed in forward looking
statements. Forward looking statements are based on expectations,
estimates and projections at the time the statements are made that
involve a number of risks and uncertainties which could cause
actual results or events to differ materially from those presently
anticipated. Any such statement involves risks, uncertainties,
changes, conditions, and unforeseen acts, which may materially and
adversely alter those expectations. Wexford makes no guarantee as
to the accuracy or reliability of any information included herein
and has no liability based upon the use of such information.
Wexford makes no representation that the information contained
herein includes all material facts or does not omit a material fact
necessary to make the statements therein not misleading. All
readers of any portion of information contained herein should not
view such information as legal, tax, accounting or investment
advice. Past performance is never indicative of future results and
readers should perform their own due diligence, including
consulting with a licensed, qualified investment professional or
analyst, before making any investment or share voting decision.
This document is not a solicitation to purchase, hold, dispose of,
or vote shares, warrants, options or other securities of Bronco.
DATASOURCE: Wexford Capital LLC CONTACT: Arthur H. Amron, Partner
& General Counsel, Wexford Capital LLC, +1-203-862-7012, Web
site: http://www.wexford.com/
Copyright