FBR Capital Downgrades Bronco Drilling (BRNC) to Market Perform; Pending Acquisition Limits Upside Potential

FBR Capital downgraded Bronco Drilling (NASDAQ: BRNC) from Outperform to Market Perform. PT lowered from $13.50 to $11.

FBR analyst says, "On April 15, 2011, Chesapeake Energy (NYSE: CHK) announced its intent to acquire Bronco Drilling Company in an all-cash transaction valued at $315 million, or $11 per share. We feel that this valuation is conservative based on the company's earnings potential, but we do not believe that a cancellation of the pending transaction is likely..."We believe that there is little, short of a counteroffer, that will prevent this transaction from proceeding as planned. First, in our conversations with management, it became fairly clear that the transaction is already supported by the three largest stakeholders of BRNC shares. The family of Carlos Slim, 3rd Avenue Management, and the Bronco Management Team, together representing more than 40% of the outstanding shares, all were made aware of, and were in support of, this transaction in advance. Second, both Bronco and Chesapeake are both based in Oklahoma City, and we were told that the management teams of the two companies are extremely familiar with each other."

For more ratings news on Bronco Drilling click here and for the rating history of Bronco Drilling click here.

Shares of Bronco Drilling closed at $11.00 yesterday.

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