Sidewinder expands shale play exposure with $242M Union Drilling acquisition

In a deal valued at $242 million, Union Drilling Inc. will be acquired by Sidewinder Drilling Inc., a Houston-based startup land driller backed by Avista Capital Partners, a private equity firm.

Under the terms of the agreement and plan of merger, Sidewinder's acquisition subsidiary, Fastball Acquisition Inc., will commence a cash tender offer to purchase all outstanding shares of the Fort Worth, TX-based drilling services and equipment provider for $6.50.

The purchase price represents a premium of 40.0% over the 60-day volume weighted average share price of Union Drilling and a premium of 26.8% over the 30-day volume weighted average share price of Union Drilling as of Monday, September 24, 2012, the last full trading day before today's announcement. 

Currently, Union Drilling has 54 marketed land drilling rigs, including rigs currently under construction, across the unconventional resources space, including rigs in the Barnett, the Fayetteville, the Marcellus, the Mississippi Lime, the Permian Basin, the Utica and the Woodford.

“The deal makes sense for Sidewinder as it gives it more critical mass (currently has just two rigs in the field working for small-cap E&Ps in the Eagle Ford) and allows it to expand its customer base,” noted Global Hunter Securities analysts Tuesday.

“Sidewinder has a fully staffed operation in Houston and newbuilds contracted to go to the Bakken as well so this vastly expands its reach, especially in adding operational talent,” the analysts continued.

The analysts believe that, because of the value per rig being paid by Sidewinder (roughly $15 million for recent build outs if all the other rigs are worth $0), the likelihood of auctioning off several rigs is high. “We suspect UDRL was likely frustrated with the market’s valuation of its equity and that Metalmark’s 27% ownership and position on the board likely pushed for the sale (UDRL was the last holding in its fund),” the analysts concluded.

The deal is expected to close in Q4 2012.

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