CALLON PETROLEUM’S BID FOR CARRIZO OIL
Keywords:mergers, oil and gas industry, corporate governance
Since the fall of the price of oil in 2015, there had been significant consolidation among unconventional oil and gas producers in Texas, so initially few were shocked when in July of 2019 directors of Callon Petroleum and Carrizo Oil & Gas announced agreement on a $3.2 billion merger. However, 9.5% of Callon Petroleum was owned by Paulson & Co., a Wall Street hedge fund that strongly disagreed with the deal. Directors had cited numerous advantages, like administrative consolidation, but the hedge fund had alleged the benefits were constructed to justify management bonuses and buy-outs. Furthermore, Paulson & Co. asserted that instead of buying Carrizo, management should be focused on selling Callon. This conflict brought into focus concerns about the value of the deal.
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