Allis-Chalmers says proxy advisory firms in favor of deal with Bronco; Wexford weighs in

By Lisa Kerner

Charlotte, N.C., Aug. 5 - Allis-Chalmers Energy Inc. said two leading proxy advisory firms recommended its stockholders vote in favor of the issuance of Allis-Chalmers common stock to stockholders of Bronco Drilling Co. Inc. in connection with the proposed merger between the companies at Allis-Chalmers' special meeting on Aug. 14.

According to an Allis-Chalmers news release, Glass Lewis & Co. said the financial consideration offered by Allis-Chalmers is reasonable.

Allis-Chalmers cited the Glass Lewis report as stating: "Overall, we see no reason to object to the proposed merger. The merger is expected to create a diversified international oilfield service provider, as well as generate substantial synergies."

In making its recommendation, Proxy Governance said, "We support this proposal because, based on analysts' opinions, it makes strong strategic sense, and because it appears to place a fair value on the acquisition itself," the Allis-Chalmers news release stated.

However, Bronco shareholder Wexford Capital LLC said Proxy Governance's report recommends that Bronco shareholders vote against the merger.

Proxy advisory firm ISS Governance Services also recommended that Bronco shareholders vote against the proposed merger, according to a statement released by Wexford on Tuesday.

ISS believes that "based on the current share price and the fixed exchange ratio, the current offer undervalues Bronco," the Wexford statement said.

Wexford said ISS joins a growing number of shareholders, proxy advisory firms and analysts that believe the proposed merger with Allis-Chalmers is not in the best interest of Bronco's shareholders.

Shareholders opposed to the merger, in addition to Wexford, include Bronco's largest shareholder Third Avenue Management LLC and Alpine Associates.

FBR Capital Markets expects that fewer than 50% of Bronco's shareholders will vote for the merger agreement, the Wexford release noted.

Reports from Jefferies & Co., Morgan Keegan & Co., and BMO Capital Markets were also cited by Wexford.

On Jan. 24, Allis-Chalmers agreed to acquire Bronco Drilling in a cash and stock deal valued at $437.8 million.

Allis-Chalmers' proxy solicitor is Georgeson Inc. (212 440-9800).

Bronco Drilling, located in Edmond, Okla., provides contract land drilling and workover services to oil and gas exploration companies.

Houston-based Allis-Chalmers provides services and equipment to oil and natural gas exploration and development companies.

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