Bloomberg News

Exco’s Board Rejects $4 Billion Buyout Offer From CEO Miller

July 08, 2011

(Updates with comment from energy-sector specialist starting in seventh paragraph.)

July 8 (Bloomberg) -- Exco Resources Inc., the Dallas-based natural-gas producer, rejected a $4 billion offer from Chief Executive Officer Douglas H. Miller and is terminating its process to seek a buyer after receiving no offers that were in the shareholders’ interest.

The company “determined it was not reasonably likely to receive any such proposal in the near term,” the board’s special committee, formed to evaluate bids, said today in a statement.

Miller, 63, offered on Oct. 29 to buy all the shares of Exco that he doesn’t already own for $20.50 a share, or 38 percent more than the closing price the day of the bid. He made another offer to buy about 81 percent of the company at $18.50 a share, the special committee said today.

Exco fell 79 cents, or 4.7 percent, to $15.85 at 4:15 p.m. in New York Stock Exchange composite trading. The shares earlier dropped as much as 6 percent.

The company’s stock will recover, said Michael Bodino, head of energy research for Global Hunter Securities LLC in Fort Worth, Texas. The long-term outlook for gas has solidified since Miller made his offer because of increased demand and the Fukushima nuclear disaster in Japan, said Bodino, whose firm doesn’t rate Exco and owns none of its stock.

Falling Prices

Miller didn’t immediately return a phone call seeking comment. He owns about 2 percent of the company, according to data compiled by Bloomberg. Exco’s shares were undervalued because of declining gas prices, Miller said in November.

The CEO shouldn’t be forced out of his job following a failed bid, said Eliecer Palacios, an energy-sector specialist at New York-based investment bank Maxim Group LLC.

“He hasn’t done anything wrong,” Palacios said in a telephone interview.

Exco now may consider joint ventures or sales of some assets, Palacios said.

Miller was joined in his October bid by three of Exco’s four largest shareholders: Dallas billionaire T. Boone Pickens, Oaktree Capital Management LLC and Ares Capital Management LLC.

Exco’s proved gas reserves rose 56 percent last year to the equivalent of 1.5 trillion cubic feet from 959 billion cubic feet because of an increase in production from Louisiana’s Haynesville Shale, the company said on Jan. 31.

The deal would’ve been Miller’s third buyout of Exco. The former Coda Energy Inc. executive bought 51 percent of Exco in 1997, leaving the rest of the shares publicly traded, and became CEO.

In 2003, he took the company private through a buyout with backing from Cerberus Capital Management LP. He listed shares again in 2006.

--With assistance from Zachary R. Mider in New York and Edward Klump in Houston. Editors: Jasmina Kelemen, Steven Frank.

To contact the reporter on this story: Mike Lee in Dallas at

To contact the editor responsible for this story: Tina Davis at

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