QEP Resources aims to become a Permian pure-play company. Credit: Zorin09.

Investment management firm Elliott Management has made a proposal to acquire all of the outstanding shares of US-based exploration and production company QEP Resources for a $2.07bn all-cash transaction.

The offer values QEP at $8.75 a share and represents a 44% premium to the stock’s closing price on 4 January.

Elliott made the proposal in a letter to QEP’s board. In the letter, the company claimed that QEP remains deeply undervalued and the sale would be the best approach to maximise shareholder value.

Elliott manages funds that have invested in the common stock and economic equivalents of QEP. According to Refinitiv data, the company holds a 5% stake in QEP.

“QEP as a public company investment has not worked, and its stock continues to trade well below its intrinsic value.”

The company stated that it engaged with QEP’s board of directors and management since the beginning of last year to decide on the best path forward for QEP to deliver maximum value to shareholders.

A statement in the letter read: “QEP as a public company investment has not worked, and its stock continues to trade well below its intrinsic value.

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“We believe that a sale of the company pursuant to the proposal gives shareholders a direct path to realising a compelling premium for their shares with far greater certainty than if QEP were to remain a publicly traded company.”

The proposed acquisition is subject to satisfactory completion of due diligence and other conditions.

In response to the proposal, QEP Resources said: “The company’s board of directors intends to review Elliott’s proposal and will carefully consider the proposal in the context of the best interests of all of the company’s shareholders, taking into account the company’s other alternatives and current market conditions.”

QEP operates in the Permian Basin in Texas, the Williston Basin in North Dakota, and the Haynesville Shale natural gas play in Louisiana.

Last November, the company reached agreements to sell oil and gas assets in the Haynesville/Cotton Valley and the Williston Basin as part of its efforts to become a Permian pure-play company.

Elliott noted that the offer is conditional on the completion of the Haynesville asset transaction, but not on that of the Williston asset sale.