GeoPark Shares Plunge as Parex Abandons Takeover Bid
The Latin America-focused energy producer saw its shares fall sharply after takeover talks with Parex Resources collapsed over a valuation dispute.
Shares of GeoPark Ltd. (NYSE: GPRK) plummeted Tuesday morning after Canadian rival Parex Resources Inc. announced it was terminating discussions regarding a potential takeover, ending weeks of speculation and erasing the premium that had been built into the company's stock price.
The stock fell more than 8.4% to $7.46 in morning trading after plunging as much as 12.3% in pre-market activity. The sell-off was a direct investor reaction to the collapse of the deal, which unraveled after the two companies failed to agree on a price for the Latin America-focused oil and gas producer.
Parex confirmed in a press release Tuesday that it had halted the talks. The central issue was a valuation gap that the two parties could not bridge. According to a prior statement from GeoPark, its board had unanimously rejected an unsolicited, all-cash proposal of $9.00 per share from Parex.
In its rejection of the offer, GeoPark's board argued the bid "significantly undervalues" the company and its growth prospects, particularly following its recent acquisition of key assets in the Vaca Muerta basin in Argentina, a prolific shale play.
The market's reaction effectively strips the takeover premium from GeoPark's valuation, bringing its share price closer to where it traded before acquisition interest became public. Even at the rejected $9.00 offer price, the bid was well below the average analyst target price of $11.08, suggesting Wall Street largely agrees with GeoPark's assertion that it is worth more.
While the deal is off, the situation may be far from over. Parex has already accumulated an 11.8% stake in GeoPark, making it a significant shareholder. According to StreetInsider, Parex has indicated it may seek to call a special meeting of shareholders, a move that could signal an attempt to pursue a more aggressive, or even hostile, path to a takeover by appealing directly to other investors.
GeoPark operates a diversified portfolio of assets across Colombia, Ecuador, Brazil, and Chile, with production that makes it an attractive target for larger players looking to expand their footprint in the region. However, the company has faced headwinds, with quarterly year-over-year revenue growth declining by over 21%.
For now, GeoPark will have to proceed as a standalone entity, focusing on developing its asset base, including the promising Vaca Muerta acreage. Investors will be closely watching for the company's next strategic move and whether Parex Resources decides to leverage its substantial ownership stake to force further negotiations.