Huston Exploration Seeking Alternative to Jana Bid

WEST PALM BEACH, FL (HEDGECO.NET) – Jana Partners LLC, a hedge fund worth approximately $5 billion, was turned down in their proposal to acquire the remaining interest of 87.7% in The Houston Exploration Co for approximately $1.6 billion in cash. According to the letter of intent, Houston Exploration shareholders would receive $62.00 per share in cash for every Houston Exploration stock they hold.

Jana had previously called upon Houston to maximize shareholder value through a $650 million share repurchase and the exploration of strategic alternatives, including the sale of the company. The stock jumped after Jana Partners gave Houston Exploration a letter informing the energy company’s board of an all-cash buyout offer of $62 per share, or about $1.8 billion. The shares rose $4.43, or 8.1 percent, to $59.08 in midday trading Monday on the New York Stock Exchange.

On 26 June 2006, two weeks after receiving the unsolicited takeover offer from the activist hedge fund operator, the Houston Exploration Co Board of Directors rejected JANA Partners LLC’s bid. The Houston based company has hired Lehman Brothers Inc. and the law firm of Akin Gump Strauss Hauer & Feld LLP to help them explore other alternatives.

Jana Partners, which has offices in New York and San Francisco, in early June disclosed that it had amassed nearly 3.6 million common shares of Houston Exploration, or a stake of approximately 12.3 percent. The hedge fund operator earlier this year called on the oil and gas company to repurchase a substantial portion of the Houston company’s outstanding shares.

In the June 12 letter outlining the unsolicited takeover offer, Jana claimed that the tremendous value in the energy company’s shares has been endangered partly by Houston Exploration management’s refusal to convince its board to pursue maximum value for shareholders.

Despite the takeover buzz, shares of Houston Exploration remain well off a 52-week high of $71.47. But the stock has jumped from a 52-week low of $48.13.