Public Companies

Public Companies July/August 2010

by Leslie Turk

IberiaBank, MidSouth Bank say exposure on oil spill limited

Responding to media inquiries and the investment community, officials at IberiaBank Corp. (Nasdaq: IBKC) and MidSouth Bank (NYSE Amex: MSL) each made public disclosures explaining their exposure to the Gulf of Mexico oil spill.

IberiaBank said June 8 that its $5.7 billion loan portfolio has only limited exposure to industries that are being impacted by the ongoing Gulf disaster. It noted that the three industries that face the greatest perceived impact of this event are fishing and seafood, seasonal beach tourist businesses, and the Gulf energy sector. As of March 31, 2010, the bank's total loan portfolio was geographically diverse with limited industry concentrations, particularly as related to those three industries. Its exposure to the fishing and seafood industries was less than $10,000 at May 31, and it essentially has no credit exposure to seasonal beach tourist businesses. It has no branches or lending activity in the Panhandle of Florida or on the Alabama coast.

Based on a preliminary review of its energy-related businesses, IberiaBank estimated that clients with a direct impact had aggregate loan balances of approximately $67 million (1 percent of total loans), those with an indirect impact totaled approximately $17 million (less than 1 percent of total loans), and those clients with no perceived impact totaled approximately $99 million.

Two weeks after IberiaBank's announcement, MidSouth Bank confirmed it, too, has limited direct exposure to deepwater drilling, roughly $15 million. Based on total loans of $576 million at March 31, 2010, this direct exposure represents less than 3 percent of the bank's loan portfolio. While MidSouth has a history of strong lending to the oil services industry, the majority of those loans are concentrated to companies that drill on land or in shallow water or service the production side of the industry, representing approximately 16 percent of the loan portfolio.

Like IberiaBank, MidSouth does not have meaningful loan exposure on fishing and seafood and beach tourism. MidSouth noted that the near term impact of the containment and clean-up efforts associated with the oil spill had been somewhat positive to the hospitality, restaurant and boating industries for its markets in south Louisiana. "The long term indirect impact for MidSouth of this unfortunate event remains uncertain in the face of the recent moratorium on deepwater drilling and anticipated changes to industry regulations," the bank wrote.

**OMNI shareholders fight to stop acquisition
Carencro-based OMNI Energy Services Corp. (Nasdaq: OMNI) said July 16 that the "go shop" period on its planned acquisition by New York City-based Wellspring Capital Management LLC had expired. Announced June 3, the deal calls for Wellspring to acquire all of OMNI's outstanding shares for $2.75 per share in cash in a deal valued at about $57.8 million as the environmental- and seismic-services provider for the oil and gas industry aims to strengthen its balance sheet. The total transaction is valued at $122 million, including assumption of debt.

The cash consideration represents a premium of almost 30 percent over the closing price of OMNI shares on June 3. "We believe this transaction will deliver an immediate and significant premium for our shareholders especially in light of the uncertain markets after the unprecedented drop in our end markets in 2009 and the continued current uncertainty in the Gulf of Mexico," said Brian J. Recatto, president and CEO of OMNI, in announcing the deal.

A number of shareholders took issue with the merger, which was soon met by an onslaught of lawsuits: six state court actions in Louisiana and a similar action claiming violation of federal securities laws was brought in federal court in Lafayette. Plaintiffs accuse OMNI executives of issuing misleading proxy statements and claim the deal undervalues the company. In part they argue that the transaction appears to be unfair, given that OMNI stock was trading at $3.32 a share as recently as April 30, 2010, and was trading at $2.82 a share on May 4. Some shareholders also claimed the "go shop" portion of the merger agreement wrongfully gave Wellspring access to any rival bidders' information and allowed Wellspring a free right to top any superior offer.

The merger agreement allowed OMNI to actively seek other possible bidders and to respond to unsolicited inquiries by others interested in acquiring the company. But after soliciting 97 identified possible purchasers in accordance with the "go shop" provisions of the agreement, the company says it did not receive any acquisition proposals and is no longer allowed to initiate or solicit proposals or continue negotiations or discussions regarding an acquisition proposal.

Under certain circumstances, however, the company may participate in discussions and negotiations with a third party if it receives an unsolicited acquisition proposal that could reasonably be expected to constitute a superior proposal.

OMNI says it has filed a motion in the state proceedings to consolidate the state actions and to stay any actions pending the federal court's consideration of the federal suit. OMNI says all the actions are without merit and that it intends to vigorously defend against them.

On May 5, OMNI reported a first quarter 2010 net loss of $0.8 million, $0.05 per diluted share, on revenues of $26.8 million, compared to a net income of $0.9 million, $0.04 per diluted share, on revenues of $34.9 million for the same period of 2009. The company said the decrease in net income is due in large part to reduced activity in its Seismic Services segment.