CPE stock has been gaining throughout December after Callon Petroleum (NYSE:CPE) completed its long-delayed merger with rival firm Carrizo Oil & Gas (NASDAQ:CRZO).
CPE Stock Hit Seven-Year Low Due to Investor Opposition
The merger of the two Houston-based oil firms had been delayed due to opposition from shareholders on both sides, particularly from activist investors in Callon led by the company’s former majority shareholder John Paulson. Initial terms of the deal would have seen Callon Petroleum pay a 25% premium on Carrizo stock, which Paulson argued was far too high. However, revised terms were put forward in November that saw the deal drop from $1.2 billion USD to $723 million USD, which was agreeable to Paulson just as CPE stock traded at its lowest point in almost seven years.
Concern Over Weakness in Oil & Gas Industry
Following the revised deal, Paulson halved his 9.5% holding of CPE stock as his skepticism towards the merger remained, pointing to the current weakness in the shale mining industry. The current deal, which was approved by a shareholder vote on December 20, will give Carrizo shareholders 1.75 CPE shares for each CRZO share held, a drop of about 15% from the initial bid. Callon Petroleum shareholders now own 58% of the combined entity as opposed to the 54% previously put forward.
“We appreciate the strong support we received for our combination,” said Callon Chief Executive Joe Gatto. “Together with Carrizo, we are creating a leading oil and gas company that is positioned to accelerate the achievement of our stated goals regarding increasing returns on capital and sustainable free cash flow generation. As a larger enterprise, we will employ a more efficient scaled development model that will drive a lower cost of supply and underpin resilient performance over time.” CPE stock has gained 6.8% since the completion of the deal.
CPE stock is currently trading for $4.86 on the New York Stock Exchange, with the CRZO ticker ceasing public trading.
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