GREY WOLF INC company history: the story so far

History

Grey Wolf, a Houston land driller, tried two mergers in 2008, lost the Basic deal at a shareholder vote, then agreed to be absorbed by Precision Drilling Trust.

2004-2005: Deals and a bigger credit line

Grey Wolf Inc was a US land drilling contractor based in Houston, with its rigs held through a subsidiary, Grey Wolf Drilling Company L.P. In March 2004 it announced a merger agreement to acquire New Patriot Drilling Corp. The filing gave no price or terms, and the records seen do not say how that deal ended.

The company's bank borrowing was the next thing to change. At the end of 2004 the subsidiary's credit facility with CIT lenders was raised from $75.0 million to $100.0 million, and its term was pushed out from January 2006 to December 31, 2008. Nothing was borrowed, though $18.8 million of letters of credit (bank guarantees) were outstanding. Substantially all assets were pledged as security. In September 2005 the lenders agreed to let Grey Wolf buy back shares, pay dividends or repay its convertible notes early, up to $150.0 million in total. The filing did not say any of this was planned.

2006-2007: A quiet record

The major disclosures contain no significant events for these years.

2008: The Basic merger fails

In April 2008 Grey Wolf agreed to combine with Basic Energy Services in a new company, Horsepower Holdings. Each Grey Wolf share would become 0.2500 Holdings share plus $1.82 in cash. Lenders committed up to $600.0 million of term loan and $325.0 million of revolving credit. Grey Wolf holders were to own about 53% of the combined company.

In June, Precision Drilling Trust made unsolicited offers for Grey Wolf, raised to US$10.00 per share in cash and trust units by June 24. The board judged that the offers were not likely to produce a Superior Proposal (a better offer than the existing deal) and stayed with Basic. On July 15, however, Grey Wolf shareholders did not approve the Basic merger. The deal was ended by mutual agreement, and Grey Wolf paid Basic a $5 million termination fee. A further $25 million could be owed if Grey Wolf agrees to a sale to anyone else within 365 days and completes it.

2008-2009: Sale to Precision

On August 24, 2008 Grey Wolf signed a merger agreement with Precision, the party it had earlier turned down. Grey Wolf would merge into Precision Lobos Corporation. Shareholders could elect $9.02 in cash or 0.4225 Precision units per share, subject to proration, which at the maximum amounts meant $5.00 in cash and 0.1883 of a unit. Grey Wolf holders would own about 25% of the combined company. Four banks had committed to fund the cash portion, and Grey Wolf could owe a termination fee of up to $64.0 million in certain circumstances. Directors and executives agreed to vote in favour.

The board filed its proxy statement on October 29, with a shareholder meeting set for December 9. On December 2 the parties amended the agreement to cover cash for convertible noteholders who do not convert, and the meeting was postponed to December 23, when closing was expected. As of December 3, the merger had not been approved or completed.

On December 24 the exchange filed to remove a class of Grey Wolf securities from listing, and on January 7, 2009 the company ended the registration of a class of securities, ending its reporting obligation for them.

Written from the 13 story beats below (2004 to 7 Jan 2009), which come from the company's own announcements and filings.

Beat by beat

The events that changed the company's story, in plain English, each written against everything known about the company at the time. The dot shows whether it was good, bad or neutral for shareholders.

2009

7 Jan
GREY WOLF INC terminated the registration of a class of securities, ending its reporting obligation for them.
listing compliance notice

2008

24 Dec
GREY WOLF INC's exchange filed to remove a class of its securities from listing.
listing compliance notice
3 Dec
On December 2, 2008 Grey Wolf and Precision amended the merger agreement to clarify that cash that would have gone to convertible noteholders who do not convert before the merger will be kept by Precision toward repurchasing those notes if holders require it after the merger. The amendment also ensures common shareholders receive in aggregate $5.00 in cash and 0.1883 of a Precision unit per share on a fully diluted basis. The shareholder meeting was postponed from December 9 to December 23, 2008, and the parties expect the merger to close on December 23, 2008, promptly after the meeting. The merger has not yet been approved or completed.
business combination
29 Oct
Grey Wolf filed its definitive proxy statement/prospectus for the Precision merger, with a special shareholder meeting set for December 9, 2008 (record date October 27, 2008). The board unanimously recommends approval, which needs a majority of outstanding shares. Terms are unchanged from the August agreement: $9.02 in cash or 0.4225 Precision units per share, subject to proration, or $5.00 in cash and 0.1883 of a unit at the maximum amounts. Precision units closed at $8.90 on the NYSE on October 27, 2008, a figure stated in the filing.
business combination
27 Aug
Grey Wolf signed a merger agreement on August 24, 2008 with Precision Drilling Trust, the party whose unsolicited offers the board had earlier rejected, under which Grey Wolf merges into Precision Lobos Corporation. Shareholders can elect $9.02 in cash or 0.4225 Precision units per share, subject to proration, which works out to $5.00 in cash and 0.1883 of a unit per share at the maximum amounts (about US$1.12 billion cash and 42.0 million units). Grey Wolf holders would own about 25% of the combined company. The deal needs Grey Wolf shareholder approval, regulatory approvals, an effective registration statement and listing approval; financing is not a condition, and Deutsche Bank, RBC, HSBC and TD have committed to fund the cash portion. Grey Wolf could owe Precision a termination fee of up to $64.0 million in certain circumstances. Directors and executive officers agreed to vote their shares in favour. The rights plan was amended (Amendment No. 2) so Precision does not trigger it, and it still expires September 18, 2008. This replaces the terminated Basic deal.
business combination
15 July
Grey Wolf shareholders did not approve the Basic merger at the July 15, 2008 meeting, so the two companies mutually terminated the merger agreement. Grey Wolf paid Basic a $5 million termination fee, and a further $25 million could be owed if Grey Wolf agrees to a sale to anyone else within 365 days and completes it. Grey Wolf expects about $17 million of shared merger costs. The board said it will again review alternatives for enhancing shareholder value, which leaves the Precision Drilling Trust offers as an open question.
material agreement termination
27 June
Precision Drilling Trust raised its unsolicited offer a third time, on June 24, 2008, to US$10.00 per share in cash and trust units (cash capped at 50%). Grey Wolf's board again determined it is not, and not reasonably likely to result in, a Superior Proposal, and responded to Precision on June 27, 2008. The board is staying with the Basic merger.
business combination
17 June
Precision Drilling Trust made a second unsolicited offer for Grey Wolf on June 14, 2008, at $9.30 per share in cash and trust units (cash capped at 40%). Grey Wolf's board concluded it is not reasonably likely to result in a Superior Proposal and still prefers the Basic merger. It complicates the Basic deal by introducing a rival bidder; the filing refers to an earlier first proposal.
business combination
10 June
Grey Wolf and Basic filed the final joint proxy statement for the merger, with both shareholder meetings set for July 15, 2008 (record date June 6, 2008). The boards of both recommend voting for it. Former Grey Wolf holders would own about 53% of the combined company and former Basic holders about 47%, based on shares outstanding April 18, 2008. Holdings would be renamed Grey Wolf, Inc. and expected to list on the NYSE as GW.
business combination
22 Apr
Grey Wolf signed a merger agreement on April 20, 2008 with Basic Energy Services to combine in a new company, Horsepower Holdings. Each Grey Wolf share would convert into 0.2500 Holdings share plus $1.82 in cash. This resolves the open question about a merger partner in a new way (the earlier New Patriot Drilling deal is not mentioned). Closing needs shareholder and regulatory approvals and financing; Goldman Sachs Credit Partners and UBS lenders committed up to $600.0m of term loan and $325.0m of revolver. A termination fee of up to $30.0m may be payable in certain cases. Grey Wolf's rights plan was amended so the deal does not trigger it. Four executives, including CEO Richards, got amended employment agreements making the merger a Change of Control.
business combination

2005

14 Sept
On September 13, 2005 Grey Wolf and its CIT lenders amended the credit facility to allow share buybacks, dividends and prepayments of its 3.75% convertible notes due 2023 and floating rate convertible notes due 2024. Total such payments are capped at $150.0 million and require no default, at least $35.0 million of availability afterwards, and three business days' notice. This loosens earlier limits; the filing does not say any buyback, dividend or prepayment is planned.
security holder rights change
6 Jan
Grey Wolf's drilling subsidiary amended its CIT credit facility on December 31, 2004, raising the maximum borrowing from $75.0 million to $100.0 million and extending the term from January 2006 to December 31, 2008. Nothing is currently borrowed, though $18.8 million of letters of credit are outstanding. Substantially all assets are pledged as collateral and Grey Wolf, Inc. guarantees the debt.
material agreement

2004

9 Mar
Grey Wolf announced it signed a merger agreement to acquire New Patriot Drilling Corp. The filing only attaches the March 8, 2004 press release and gives no price, terms or closing conditions, so the deal's size and effect on shareholders are not stated here.
business combination