December 22, 2008 / 4:27 PM / 11 years ago

UPDATE 2-Grey Wolf plunges as Precision's purchase nears

(Recasts to add details from Grey Wolf release. In U.S. dollars unless noted.)

CALGARY, Alberta, Dec 22 (Reuters) - Shares in oil drilling firm Grey Wolf Inc GW.A fell by more than half on Monday, reflecting a drop in the price of units of buyer Precision Drilling Trust PD_u.TO, which expects to close a cash-and-shares takeover of Grey Wolf on Tuesday.

Precision, Canada’s Canada’s biggest oil and gas drilling company, announced the $2 billion acquisition of Houston-based Grey Wolf in August as it looked to hasten an expansion of its U.S. business.

The company offered $9.02 cash or 0.4225 of a Precision trust unit for each Grey Wolf share. The U.S. firm’s shareholders had until Friday to elect if they wanted cash or Precision’s trust units for each of their shares.

However Precision’s Toronto Stock Exchange-listed units have fallen 60 percent since the offer, hammered by global economic turmoil and weak oil and gas prices, and the share portion of Precision’s offer is now worth only about $2.91.

Grey Wolf’s shares fell $3.27, or 51 percent to $3.09 at midafternoon on the American Stock Exchange. Earlier they touched $2.90

David Wehlmann, Grey Wolf’s chief financial officer, said the shares were reflecting the value of Precision’s units, since investors buying the stock today could not receive cash.

“You had to make an election by Friday, if you buy a share today it’s non-electing,” he said.

Grey Wolf said on Monday that the cash portion of the offer was oversubscribed and shareholders who took that option would receive a prorated amount of cash and Precision units. However, the final ratio won’t be available until some time after Christmas, Wehlmann said.

Doug Strong, Precision’s chief financial officer, said the company still expects the acquisition to close on Tuesday.

“We are working towards the execution of the deal,” Strong said.

Precision units rose 7 Canadian cents to $8.51 at midafternoon on Monday on the Toronto Stock Exchange. ($1=$1.22 Canadian) (Reporting by Scott Haggett and Anna Driver; editing by Peter Galloway)

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