Precision launches $1.6 bln bid for Grey Wolf

CALGARY, Alberta (Reuters) - Precision Drilling Trust (PD_u.TO) said on Tuesday it has made an unsolicited $9 a share bid, worth about $1.6 billion in total, for contract oil driller Grey Wolf Inc GW.A in order to boost its U.S. presence.

Kevin Neveu, chief executive of Canada's biggest drilling firm said Precision was looking to expand in the United States and said Grey Wolf, which has a fleet of 121 rigs, offered "a significant U.S. footprint" and would add to Precision's move to build its business there.

"We've been kicking off a pretty aggressive organic growth program in the U.S." Neveu said. "But it's slow ... and Grey Wolf has a great geographic footprint and a great customer footprint."

Precision is offering a cash and stock mix for each Grey Wolf share, with the cash contribution limited to no more than a third of the total price.

Precision said its offer represents a 21 percent premium to Grey Wolf's average share price over the past 30 days.

It also said it believes its bid offers better value to Grey Wolf's shareholders than the U.S. firm's plan to acquire Basic Energy Services Inc (BAS.N), announced in April.

Precision has been building up its U.S. operation in order to take advantage of the more robust drilling market there. But progress has been slow and buying a rival will accelerate its expansion.

One analyst said the acquisition is unlikely to boost Precision's earnings this year but will add to the bottom line starting in 2009. As well, Grey Wolf's drilling rigs may help Precision's plans to expand its presence internationally.

"There's a lot of strategic advantages to (the acquisition)," said John Tasdemir, an analyst with Tristone Capital. "As you look into 2009 and beyond, the deal makes a lot of sense"

Precision currently owns 240 drilling rigs and 230 service rigs.

Houston-based Grey Wolf said in a release that its board of directors was evaluating the Precision offer.

There were no talks between the two companies prior to the bid.

Grey Wolf shares rose 74 cents to $9.02 on the American Stock Exchange. Precision units fell C$1.12 to C$27.03 on the Toronto Stock Exchange on Tuesday.

($1=$1.02 Canadian)

(Reporting by Scott Haggett; editing by Rob Wilson)