Superior Energy, Yahoo!: Deals to Watch

NEW ORLEANS ( TheStreet) -- In a move to bolster shale gas drilling capabilities, offshore oil drilling specialist Superior Energy Services ( SPN) has agreed to buy Complete Production Services ( CPX) for $2.7 billion in a cash and stock purchase.

To buy Complete, Superior is offering a .945 portion of its own stock and $7.00 in cash for each Complete share, taking a 52% stake in the company. Superior will be issuing new shares to fund the deal, according to a press release announcing the deal. The math of the deal works out so that Superior is paying roughly $32.90 a share for each Complete share -- and it will be adding roughly 75 million shares, doubling its outstanding shares, according to a quick estimate given to The Street by Trey Stolz, a managing director of research at Iberia Capital Partners.

In early trading, Complete Production Services shares rose nearly 40% to over 28.11, while Superior Energy Services shares fell over 17% to below $23. It's a potentially dilutive and expensive deal that has pushed Complete Production Services' market cap above Superior Energy Services' when the markets opened Monday morning.

The deal values Complete Production Services at over $2.7 billion or is over a 60% premium from the stock's last close before the deal was announced and nearly 30% over its 2 month average - but below the recent high of $42.60 a share that the company reached in July.

Complete Production Services has fallen over 40% since its July all-time high, since being a public company in 2006. In the deal announcement, the company also said its third quarter earnings will be than previous guidance, and it lowered its overall 2011 projection of earnings before interest, taxes, depreciation and amortization by $5 million to $155 million.

With the purchase, Superior Energy Services is looking to add shale gas drilling abilities to its existing specialty in offshore drilling services in the Gulf of Mexico and in 16 international regions. The New Orleans- based company founded in 1989 with close to 5,000 employees and annual revenue of $1.4 billion has divisions that provide subsea oil well control products, drill piping and a services division for oil exploration companies drilling exploratory deep and shallow water oil wells.

Complete Production Services, founded in 1994 and with $1.5 billion in revenue and 5000 employees, sells pressure pumps and well services for the hydraulic fracking that's used in shale gas drilling. It has a regional focus in North American shale, including operations in the largest shale reserves like the Haynesville Shale in North Louisiana, the Marcellus Shale in Pennsylvania, the Bakken Shale in North Dakota, the Fayetteville Shale in Arkansas, the Woodford Shale in Oklahoma and the Barnett Shale region of North Texas.

In a statement announcing the deal, Superior Energy Services Chief Executive David Dunlap said, "Together we will have enhanced positions in large sectors for key products and services that are high in usage intensity and deemed critical by our customers during their drilling, completion and production processes. Some of these products and services include hydraulic fracturing and other pressure pumping services, coiled tubing, well servicing, snubbing and wireline, in addition to fluid handling and production testing."

Dunlap replaced former CEO Terrence Hall in April 2010. This is his largest acquisition to date, previously he'd been an executive vice president and chief operating officer of BJ Services Company, a piece of Baker Hughes ( BHI). His other acquisition was to buy sand control completion tool businesses from Baker Hughes in August 2010.

Complete earned its first annual profit since 2007 in its most recent year ended Dec 31, recording net income of $84.2 million on a nearly 50% increase in revenue to $1.56 billion. In the most recent quarter ended June 30th, the company reported revenue of $551.9 million, up more than 40% from the same period last year and a near tripling of net income.

Superior Energy Services reported its highest revenues and net income since the BP's Macondo oil well blowout in 2010, the worst environmental catastrophe in U.S. history. It's annual revenue in 2010 of $1.68 billion are still below all-time highs of $1.89 billion in 2008. With drilling resuming in the Gulf of Mexico and strong international offshore drilling activity, Superior's revenue more than doubled to $81.8 million in the most recent quarter.

To grow its drilling services capabilities, Superior Energy Services has been a heavy acquirer of companies with new expertise. In 1999, it merged with Cardinal Services, a top Gulf of Mexico lift boat operator and wire line services company. In 2003, Superior bought Scottish oilfield services company Premier Oilfield Services to expand internationally to the North Sea, Europe, the Middle East and West African markets. In 2006, it bought Warrior Energy Services to expand onshore drilling capabilities. Just ahead of the Macondo blowout, the company in 2009 also bought Hallin Marine Subsea International, to build its operations in deepwater well control. As a result of acquisitions and a boom of drilling in the Gulf, Superior Energy was ranked No. 15 on Fortune Magazine's Top 100 Fastest Growing Companies list, according to its company website.


Jack Ma and Jerry Yang are both actively working to take Yahoo!'s ( YHOO) private according to separate reports from Reuters and Bloomberg. Reuters first reported Monday that according to unnamed sources, a consortium of private equity investors Yahoo CEO and Co-founder Jerry Yang would roll over his stake in Yahoo!, which stood at 3.63% as of April 2, Reuters and co-founder, David Filo would roll his 5.9% stake as of May 11th to assist in a management buyout alongside private equity investors.

Meanwhile, Bloomberg reported that Temasek, the Singaporean sovereign wealth fund may give Alibaba and its founder Jack Ma financing to buy up a 40% stake Yahoo!, according to unnamed sources. The Sunnyvale, California -based internet search provider, owns a 43% stake in Alibaba, its most highly valued asset, recently given a valuation of $13 billion in September when private equity firms Silver Lake Partners and DST Global led a consortium of investors to buy a stake in the Chinese e-commerce giant.

Last month, Jack Ma, CEO of Alibaba, said he would be "very interested" in buying Yahoo!.

Yahoo shares rose over $16 in early trading up over 3%.

The two new twists add to an already frenetic fall for Yahoo!, the largest website in the world and second largest internet search provider. Last month reports surfaced that Yahoo was considering a sale and had hired investment bankers. In a letter to employees subsequently confirmed it hired Goldman Sachs ( GS) and Allen & Company to be advisers on strategic options. Those options now vary in a multitude of ways including a private equity, ownership or Alibaba buyout in addition to traditional mergers or asset sales.

Rumors have ranged from a Microsoft ( MSFT) takeover to a buyout from Alibaba, another Yahoo! venture or private equity firms Silver Lake and Hellman & Friedman.

Last week

The Financial Times reported that Yahoo! ( YHOO) may be looking to sell its 35% stake in Yahoo Japan.

Yahoo Japan is the U.S. online search and news giants second largest asset after its 40% holding in Chinese ecommerce company Alibaba. Currently Yahoo Japan is valued at $19 billion, making a 35% stake worth nearly $6.65 billion.

Currently, Yahoo! has a total market cap of nearly $20 billion, almost equal to the two minority-owned assets rumored for sale -- stoking investor or takeover interest

Yahoo!, the largest U.S. website by viewers is reeling after its board voted to fire former Chief Executive Carol Bartz earlier this September and replace her with CFO Timothy Morse on an interim basis.