UPDATE 5-Encana to buy Athlon for $5.93 bln in push for oil

Mon Sep 29, 2014 4:58pm EDT
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By Scott Haggett and Euan Rocha

CALGARY/TORONTO Sept 29 (Reuters) - Canada's Encana Corp said on Monday it will buy Athlon Energy Inc for $5.93 billion in cash, taking aim at Athlon's oil-rich lands in Texas's Permian Basin and at jump-starting its plan to boost output of lucrative oil and natural-gas liquids.

Encana, Canada's largest natural-gas producer, is offering $58.50 per Athlon share, a 25 percent premium on the stock's Friday closing price. The deal would give the Calgary-based company control of about 140,000 acres in the oil-rich Permian Basin, where Encana says it can raise liquids output by two thirds, to 50,000 barrels per day, by 2015.

With the purchase, Encana adds another core region to the six shale fields in Canada and the United States in which it concentrates its spending. The acquisition also speeds Encana's transformation from a gas-heavy company to a major oil producer, a process started last year by Chief Executive Doug Suttles.

"We like the deal," said Robert Taylor, senior vice-president at Canoe Financial, which holds about 3.17 million Encana shares, according to Thomson Reuters data. "Strategically it's exactly what the company said it would do ... (The price) is a little bit rich relative to what a lot of people would have expected but it's a high-quality asset."

Encana shares were up 2.3 percent at C$24.13 late on Monday morning on the Toronto Stock Exchange, while Athlon's rose 11 percent to $58.21 in New York.

The takeover will lead to a huge payday for Apollo Global Management. Athlon was formed in 2010 with the backing of the U.S. private equity firm, which still owns more than 30 percent of the company's stock, according to Thomson Reuters data.

The offer price for Fort Worth, Texas-based Athlon is a nearly threefold increase on the price at which the company went public.   Continued...