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Callon Pressured to Ditch Carrizo Deal by Major Shareholder

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   |    Monday,September 09,2019

Billionaire investor John Paulson and his hedge fund, Paulson & Co., is pushing Callon Petroleum to ditch its pending $3.2B acquisition of Carrizo Oil & Gas.

The firm released a letter outlining its position, which asserts that Carrizo's "inferior" Eagle Ford assets will drag down Callon's overall value and "attractiveness to potential acquirers."

Based on the metrics of the deal, Callon is paying a 25% premium for Carrizo based on current share prices. Share values of both companies have dipped since the deal was announced.

Paulson & Co. owns a ~9.5% stake in Callon.

Other reasons the letter stated include:

  • Callon's stock price has fallen by 36% since the transaction was announced.
  • Shareholders have lost $530 million in value.
  • Callon is paying Carrizo a 25% premium, which is unjustifiable given the inferior assets of Carrizo, and results in the transfer of $240 million in value from Callon shareholders to Carrizo shareholders.
  • Callon will lose its premium valuation as a "pure play" Permian producer, resulting in multiple contraction.
  • Based on the multiples at which pure Permian producers trade, Callon's shares could be worth 64% more than its current value through a sale of the Company.
  • Adding Carrizo's inferior Eagle Ford assets will permanently reduce the attractiveness of Callon to potential acquirers.

 





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