Venoco Buyout, Forcing Shareholder Losses (VQ)

Venoco Inc. (NYSE: VQ) is up big on news that the company has agreed to be acquired in a go-private transaction by its chief executive officer.  This is said to be the second-largest land holder out in the Monterey oil-shale formation in California,  Shares were up more than 50% on news of the buyout.  At $11.50, the $12.50 buyout comes from Chairman and CEO Timothy Marquez.

This is one of those deals which may be a killer to many holders despite a high premium.  There may also be little to nothing that can be done to stop it.  Marquez owns just over 50% of the voting interest. The 63% premium in the all-cash cash bid may value the outfit at $770 million.  This is actually unchanged from Marquez’s bid that sparked shareholder suits last year.

The fact that the “special committee formed by the board of directors” called this as being in the best interests of holders may not matter even if other alternatives were explored.

Rick Walker, the Chairman of the special committee, stated, “After a thorough assessment, with the assistance of independent legal and financial advisors and after a comprehensive 5-month search of the market for superior alternatives, we concluded that this transaction will maximize value for our public shareholders. We are also pleased to have successfully negotiated a ‘majority of the minority’ approval right for our public shareholders.”

The transaction is subject to regulatory and shareholder approvals.  The total deal may get approval, but it is the notion that outsiders have such a limited voice here where the questions will arise all over again.  At $10.50, the 52-week trading range is $6.50 to $22.46.  That means that some shareholders who have been long and wrong will face significant losses even if this is a high premium to last week’s share price.

Venoco was above $20.00 per share briefly in 2010 and in 2011.

JON C. OGG