History
An Oklahoma oil and gas company merged with its royalty affiliate, bought gas properties, survived a 1998 price collapse, then was sold for $11.00 a share in cash in 2000.
1997-1998: Merging with its affiliate
The Home-Stake Oil & Gas Company was incorporated in Oklahoma in 1917, starting as an oil and gas royalty and mineral-leasing business and becoming an active driller from the 1950s. It was credited with discovering several oil fields in south-central Kansas. For 1996 it reported net income up 236% to $1,437,674, helped by higher oil and gas prices. Its long-standing affiliate, The Home-Stake Royalty Corporation (HSRC), separately earned $1,844,161.
In August 1997 Home-Stake proposed merging HSRC into itself. HSRC holders would receive 48.66 new Home-Stake shares per HSRC share, while existing Home-Stake holders would receive 30 new shares for each old one, in effect a 30-for-1 split. Shareholders of both companies approved the deal on December 11, 1997, and the merger took effect on December 31, 1997. About 2,742,203 new shares went to former HSRC holders. Combined net income for 1997 was $2,162,482.
1998-1999: Gas purchase and a price shock
In April 1998 Home-Stake bought the Bass Properties for about $6.6 million, through a competitive-bid open sale. These were 18 non-operated producing gas properties in Oklahoma, almost all of their value in the Wilburton Field in Latimer County, with an estimated 6.4 billion cubic feet of proved gas reserves. A bank loan financed the purchase.
The timing proved painful. In 1998 oil and gas prices collapsed across the industry, and Home-Stake wrote down its producing properties by $4,775,867. Together with higher interest costs from the Bass loan, this produced a net loss of $4,732,213. The company also ran a $900,000 working capital deficit and needed a bank covenant waiver to keep paying dividends. In 1999 crude prices recovered, with its average sales price up 40% to $16.93 a barrel, and net income rebounded to $2,374,632.
2000: Sold to Cortez
In October 2000 Home-Stake agreed to be acquired by Cortez Oil & Gas, Inc., a privately owned company based in Plano, Texas, for $11.00 per share in cash. The board approved the deal unanimously, and its directors and their spouses, holding about 21.1% of the shares, committed to vote in favor. Stephens Inc., the board's financial adviser, gave an opinion that the price was fair. Chairman and chief executive Robert C. Simpson and officer Chris K. Corcoran agreed to leave under separation agreements, and no further dividends were to be paid before closing.
The proxy statement sent on November 6, 2000 valued the deal at about $51,981,193 for 4,725,563 shares, including 371,736 underlying options. A special meeting was set for December 11, 2000, where a majority of outstanding shares had to approve, and not voting counted as a vote against. On December 12, 2000, Home-Stake deregistered its common stock and share purchase rights and was operating from Cortez's Plano offices, confirming the acquisition had closed by the end of the year.
Written from the 11 story beats below (1997 to 12 Dec 2000), which come from the company's own announcements and filings.