LOS ANGELES—Kirk Kerkorian’s Tracinda Corp. will pay $684 million for a 35 percent stake in Delta Petroleum Corp. in a deal that will help Delta speed drilling activities in the Rocky Mountains.
Denver-based Delta said the agreement will also provide funding for possible acquisitions. Its board unanimously approved the agreement allowing Tracinda to acquire 36 million shares.
The $19-per-share purchase price represents a 23 percent premium to the company’s closing stock price on Friday.
“We are very excited about this transaction,” Roger Parker, chairman and CEO of Delta, said in a conference call with analysts. “This puts us all in a position where we can realize significant per share increases.”
The deal must be approved by the Securities and Exchange Commission.
Based in Beverly Hills, Calif., Tracinda is a privately held corporation wholly owned by Kerkorian, who ranks seventh on Forbes’ list of the 400 richest Americans in 2007, with a net worth of roughly $18 billion.
The 90-year-old investor is a majority shareholder in MGM Mirage—operator of the MGM Grand, Bellagio and other casinos—which saw record profits at several of its Las Vegas hotel-casinos.
Tracinda’s principal business is buying, selling and holding selected equity securities. Its deal with Delta is part of a strategy that calls for more investments in energy-related companies, said Tom Johnson, a spokesman for Tracinda.
Under the agreement, Tracinda will have the right to nominate one-third of the members to Delta’s expanded board. Company shareholders will vote on the deal in February.
Earlier this month, Delta said it saw output rising in the upcoming year.
It expects to produce 4.95 billion to 5.13 billion cubic feet of natural gas equivalent during the fourth quarter. For 2008, the company predicted production increases of 40 percent to 60 percent above 2007 levels.
Delta’s core areas are the Gulf Coast and Rocky Mountains, where key areas of operations are the Piceance and Paradox basins.
“Delta Petroleum has become a very important company in the industry,” Tracinda said in a prepared statement, adding that Delta has “well-positioned exploration projects that we believe hold significant growth potential.”
Delta shares rose nearly $3, or more than 19 percent, to $18.40 in midday trading Monday.
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