Forest Oil Corp. To Acquire Houston Exploration For $1.5 Billion in Cash and Stock

After months of pressure from activist shareholders, Houston Exploration Co. agreed to be acquired by Forest Oil Corporation for $1.5 billion in cash and stock. The price, which comes out to $52.47 in cash and stock for each Houston Exploration share based on Forest's stock price Friday of 31.22, represents an 8% premium over Friday's closing price (see chart). Hedge Fund Jana Partners, Houston Exploration's largest shareholder at 14.7%, was content with the deal, which will also see Forest Oil take on $100 million of Houston Exploration's debt. The acquisition is a good fit for Forest Oil; it will add more than 3,200 drill sites in Texas and the Rocky Mountain states, a nice complement to Forest Oil's existing production in those same areas according to Forest Oil CEO H. Craig Clark. "We are undertaking this significant acquisition to further strengthen our onshore North American asset base and to add drilling inventory,'' Clark said.

• Sources: Bloomberg, Wall Street Journal, Reuters
• Related commentary: Private Equity and Leveraged Buyouts: With Risk Comes Reward, Statoil to Acquire Norsk Hydro's Energy Business, Cramer's Take on FST, Cramer's Take on THX
• Potentially impacted stocks and ETFs: Houston Exploration Co. (THX), Forest Oil Corporation (FST)

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