Wall Street traders bailed out of MidCon Corp. stock Friday following Federal Trade Commission approval of MidCon`s acquisition by Occidental Petroleum Co.
MidCon shares dropped $9 to $58.25 on the New York Stock Exchange, apparently on fears that plummeting oil prices have diminished the value of the complex stock swap that is part of the companies` $3 billion deal.
Occidental, whose petroleum assets and natural gas reserves have fallen in value since Jan. 1, when merger plans were announced, plans a $75-a-share cash offer for up to half of MidCon`s 42 million common shares outstanding. But these shares must be tendered before Feb. 20. Afterwards, remaining MidCon shares are to be exchanged for 2.25 Occidental shares.
Traders who would otherwise have been eager to buy MidCon stock following the FTC`s approval have been dumping the shares, because there`s no longer enough time to tender the shares before the deadline. And analysts` estimates of the value of the stock-swap portion of the transaction range from $57 to $67 a share because of falling oil prices.
Analysts who had estimated small losses from the transaction, such as Don Bustos of Duff & Phelps Inc., expressed surprise. ”I can`t explain, for the life of me, why MidCon fell as much as it did.”
Bustos added that the danger is not that the value of Occidental`s offer has decreased, but that it might be withdrawn. Although he said he believes it will be completed, Bustos warned: ”If this deal falls apart–and no deal is clear until the check has been signed–the price (of MidCon) will decline back into the $40s.”
