What: Penn Virginia Corporation'sstock jumped more than 20% at one point today on reports that BP plc has offered to buy the company. According to reports in the U.K., BP offered $8 per share for the Eagle Ford shale driller. However, Penn Virginia is thought to have rejected the offer as it's seeking closer to $10 per share. Still, even if Penn Virginia clinched a deal at $10 per share, that would be well below the $17.50 per share the stock was trading at last summer before oil prices collapsed, when it was also thought to be on the auction block.
So what: Penn Virginia has actually been rumored to be up for sale for more than a year as billionaire investor George Soros has been urging the company to find a buyer. Soros, who owns about 8% of the company, would like to cash out via a buyout. This past February The Wall Street Journal reported that the company had finally hired an investment bank to look for potential buyers. However, so far no deal has materialized.
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The rumored BP offer seems a bit of a stretch given the fact the Penn Virginia is such a small company. Its enterprise value is just $1.5 billion, which is minuscule compared to $165 billion behemothBP. Because of the size difference, Penn Virginia wouldn't be a needle-moving deal for BP to the same degree it would be for a smaller player.
Now what: Call it a hunch, but I'd suspect that this rumor isn't based on a whole lot of fact. While Penn Virginia is thought to be for sale, BP just doesn't seem like a very likely candidate to make an offer. While it's quite possible that someone could eventually offer Penn Virginia $8 to $10 per share, buying the stock on speculation that a deal will happen could end very badly if a buyer doesn't emerge.
The article Takeover Chatter Sends Penn Virginia Corporation's Stock Zooming Up 20% originally appeared on Fool.com.
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