M&A

2 November, 2009

Denbury shares fall after $3.2 bln Encore deal

* Denbury shares down 8 pct, Encore shares up 23 pct

* Analysts say deal premium is rich

HOUSTON, Nov 2 (Reuters) - Shares of Denbury Resources Inc (DNR.N) tumbled 8 percent on Monday, a day after the company announced plans to buy Encore Acquisition Co (EAC.N) for $3.2 billion.

The premium for the deal, which will create one of North America's largest oil production and exploration companies, may worry some investors, analysts said.

Under the deal, Encore shareholders will get $50 per share, comprised of $15 in cash and $35 in Denbury common stock.

The companies value the deal at $4.5 billion. The figure includes $1.3 billion in Encore debt and $400 million for a minority interest in Encore Energy Partners LP (ENP.N), Encore Chief Financial Officer Bob Reeves said in an email.

Based on 2008 year-end reserves and using the deal value including debt, Denbury is paying about $3.78 per proved thousand cubic feet equivalent, and $17,143 per million cubic feet equivalent on a daily production basis, according to an estimate from KeyBanc Capital Markets.

"While the price tag appears too rich on a proved basis, clearly the company is also paying for the unproved resources upside," KeyBanc said in a note to clients.

Shares of Encore climbed $8.53, or 23 percent, to $45.60. Denbury shares were down $1.21 to $13.39. Both companies trade on the New York Stock Exchange. (Reporting by Anna Driver; editing by John Wallace)

Source: http://www.reuters.com