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XTO Energy to buy Hunt Petroleum for $4.19B
(Dallas Morning News, The (KRT) Via Acquire Media NewsEdge) Jun. 11--Fort Worth's XTO Energy Inc. said Tuesday that it will buy Hunt Petroleum Corp. for $4.186 billion, combining a major Barnett Shale player and the legacy of oil tycoon H.L. Hunt.
Hunt Petroleum becomes a jewel in XTO's ravenous, $8.5 billion acquisition strategy. The sale of the storied exploration company that symbolized Dallas' oil elite also inflames the bitter battle among Hunt heirs over multibillion-dollar trust funds that are poised to get even larger.
Hunt Petroleum -- not to be confused with Hunt Oil -- is owned by the family trusts of Margaret Hunt Hill and Hassie Hunt, two of the children of H.L. Hunt.
Al Hill III, Margaret's grandson, has sued his father, Al Hill Jr., several other family members and advisers over their plan to sell Hunt Petroleum and reconfigure the trusts. His opposition to that plan, according to his lawsuit, forced his father to fire him and cut him out of the trusts entirely.
The suit accuses the Hunt family of tax evasion and squandering millions of dollars through poor trust management, and it urges the removal of longtime family confidant Tom Hunt as trustee.
Observers doubt Mr. Hill III's legal efforts will thwart the sale.
On Tuesday, the mood at XTO was ebullient.
"We're busy handcrafting a very exciting acquisition in aggregate ... at a price that one could hardly believe," said chief executive Bob Simpson, speaking about his expansion spree on a conference call with analysts.
Hunt Petroleum produces oil and natural gas throughout East Texas and Louisiana, as well as the Gulf of Mexico, the North Sea and Montana. The deal, which includes $2.6 billion in cash and 23.5 million shares, is XTO's largest purchase ever, and makes up a big chunk of XTO's recent acquisition spree.
Atypical acquisition
XTO has acquired $8.5 billion in oil and natural gas assets this year and plans to spend at least $1 billion more, Mr. Simpson said.
Hunt Petroleum, founded in 1925, isn't the typical target for XTO, which historically has preferred oil and natural gas production assets over whole companies. XTO also prefers shale projects such as North Texas' Barnett Shale, where gas and oil are buried deep in dense rock. Hunt Petroleum has few shale projects.
Even so, XTO executives said, Hunt's projects will generate a lot of cash and are near XTO's geographic operating area.
XTO executives plan to shift Hunt Petroleum from a conservative dividend company into a growth company. XTO calculates the deal will help boost its production growth this year to as much as 30 percent from a prior growth projection of 23 percent.
Lawsuit's allegations
The sale short-changes the Hunt trusts and confirms mismanagement, Al Hill III's attorney said.
"First and foremost, we're concerned with the purchase price," said Bill Brewer of the Dallas firm Bickel & Brewer. "XTO is so giddy about what a bargain-basement price they're paying for these assets. If we discover this isn't an arms-length transaction, we'll need to stop it."
Mr. Brewer said he's also suspicious that the sale might cover up some poor business practices among Hunt Petroleum executives.
"If you and I were running this company and stealing its shareholders blind and engaging in conflicts and we wanted to put it all in the rearview mirror, the first thing we'd do is sell it," he said.
George Bramblett, a Haynes & Boone lawyer who represents Hunt Petroleum chairman Tom Hunt, said the complaint is nonsense.
"As was the case for the initial litigation, there is absolutely no basis for challenging the transaction. The process was fair; the best advisers were consulted," he said.
Hunt Petroleum officials didn't respond to phone calls seeking comment.
Al Hill III contends in the suit that decades of mismanagement, self-dealing and deceit have cheated him and his children from their share of the family fortune. He wants a thorough review of the trusts' business dealings.
The suit remains stalled in federal court as a magistrate judge decides whether Bickel & Brewer is able to stay in the case. Al Hill Jr. is arguing that Mr. Brewer's firm's role in past Hill family issues disqualifies him from representing Al Hill III against the rest of the family.
XTO first heard Hunt Petroleum was for sale in December and made an offer.
Gary Simpson, head of investor relations for XTO, wouldn't say whether the company will keep every Hunt Petroleum employee. He said XTO's method is to interview employees of the target company and hire anyone who's a "right fit." Hunt Petroleum's Web site says it employs about 330 people, mostly in Dallas.
XTO expects to close the deal on or before Sept. 3.
Shares of XTO closed down 1 percent Tuesday at $67.02.
esouder@dallasnews.com;
etorbenson@dallasnews.com
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Copyright (c) 2008, The Dallas Morning News
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