Harbinger to form joint venture with Exco Resources

Mon Nov 5, 2012 9:52am EST

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(Reuters) - Harbinger Group Inc (HRG.N), a holding company controlled by billionaire hedge fund manager Philip Falcone, said on Monday it will form a joint venture with Exco Resources Inc (XCO.N), paying $372.5 million for a 75 percent stake in Exco's conventional oil and natural gas assets.

Exco will contribute $172.5 million worth of oil and gas properties to the venture, Harbinger said.

The venture will have $225 million of bank debt.

The deal will allow Harbinger to diversify its sources of revenue. The holding company makes acquisitions in undervalued firms and owns Spectrum Brands Holdings, a leading supplier of batteries, pet supplies and small household appliances like the George Foreman grill.

"We believe this deal will create long-term value by anchoring our new energy operating business with a long-duration gas asset at a time when natural gas is trading near historically low levels," Harbinger President Omar Asali said in a statement.

Oil and gas companies have been spending billions of dollars in recent years to build positions in so-called unconventional assets -- properties where oil and gas are locked in underground rock formations and require special drilling techniques like hydraulic fracturing.

Exco generally focuses on its unconventional assets, including properties in the Haynesville shale in West Texas, the Permian Basin in West Texas and New Mexico, and Appalachia's Marcellus shale.

Last year Exco CEO Douglas Miller teamed up with investors including oil man T. Boone Pickens to try to take Exco private, but the company's directors scuttled the $4 billion bid.

Falcone, once one of the hedge fund industry's most prominent managers thanks to a successful bet against the overheated housing market, has faced significant troubles this year. His largest portfolio company, LightSquared, has filed for bankruptcy, and regulators have filed civil charges against Falcone and his Harbinger Capital Partners fund, saying he manipulated the market of certain securities, giving preferential treatment to certain clients and borrowing cash from his fund to pay personal expenses.

(Reporting by Svea Herbst-Bayliss in Boston; Additional reporting by Ernest Scheyder and Michael Erman; Editing by John Wallace)

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