Bronco Drilling Company, Inc. Investor Files Lawsuit Against Takeover

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Company Name(s): 
Bronco Drilling Company
Case Name: 
Bronco Drilling Company Deal Case 04/22/2011
Case Status: 
Lawsuit Filed
Affected Securities
NASDAQ: BRNC
Lawsuit Overview
Type of Lawsuit: 
Mergers and Acquisition
Date Filed: 
04/22/2011
Summary: 

An investor in Bronco Drilling Company, Inc. (NASDAQ:BRNC) filed a lawsuit in State Court to stop the planned takeover of Bronco Drilling Company, Inc. by Chesapeake Energy.

According to the complaint the plaintiff alleges that the defendants breached their fiduciary duties in connection the proposed takeover.

On Friday, April 15, 2011, Bronco Drilling Company, Inc. (NASDAQ/GS: BRNC) and Chesapeake Energy Corporation (NYSE:CHK) announced that they have entered into an agreement for Chesapeake Energy Corp. to acquire Bronco Drilling Company for approximately $315 million, including debt, net working capital and outstanding warrants. the agreement, Chesapeake Energy Corp. will make a cash tender offer to acquire all outstanding shares of Bronco Drilling Company’s common stock at a price of $11.00 per share. Bronco Drilling Company said the $11.00 per share purchase price represents premiums of 6% and 24% over the closing price of Bronco's common stock on the NASDAQ on April 14, 2011 (the date of signing of the definitive agreement) and the average closing price for the 90-calendar day period ending on April 14, 2011, respectively.

Shares of Bronco Drilling Company, Inc. (NASDAW: BRNC) rose already from under $10 on Wednesday to $10.40 on Thursday April 14, 2011. Then on Friday, April 15, 2011 BRNC shares jumped in response to the takeover news to slightly above $11 per share. The plaintiff alleges that Directors at Bronco Drillling have a duty to get the best price for the company and have undervalued the stock. The plaintiff claims that the offer is more than $2 per share lower than analysts had pegged Bronco stock. In fact BRNC shares traded recently above the current offer. BRNC shares traded already on April 4 at $11.34 per share and on March 31, 2011 at $11.30 per share. In addition several analysts raised Bronco's target price to $13.50.

Further Bronco Drilling Company’s financial performance was increasing lately for its investors. Bronco Drilling’s 12months Total Revenue increased from $102.90million in 2009 to $124.40million in 2010.

Additionally Third Avenue Management LLC, on behalf of its investment advisory clients, and Inmobiliaria Carso, S.A. de C.V., which are Bronco Drilling Company's largest shareholders and collectively own or have dispositive authority over approximately 32% of Bronco Drilling Company's outstanding common stock, have already committed to tender all their shares into the Chesapeake Energy Corp offer.