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Exco CEO Miller Is Said to Lower Buyout Offer to $4 Billion

Exco Resources Inc. Chief Executive Officer Douglas H. Miller lowered his buyout offer for the natural-gas producer by 9.8 percent to $4 billion and added a stock component to the bid, said three people with knowledge of the matter.

A revised offer submitted to the company last week is valued at $18.50 a share, with a majority of the price in cash and the rest in shares, said the people, who spoke on the condition of anonymity because the talks are private. The stock component means that a minority of Exco shares would continue to be publicly traded. Miller’s original bid, made in October, was for $20.50 a share in cash, or about $4.4 billion.

The new proposal didn’t include committed financing, according to people with knowledge of the matter, and puts in doubt Exco’s six-month effort to find a buyer. A two-member committee of Exco’s board is reviewing the offer and may reach a decision within days, the people said.

Miller “couldn’t find buyers for the deal in order to take it private,” said Eliecer Palacios, energy-sector specialist at New York-based investment bank Maxim Group LLC. There may still be interest among investors who want to buy into gas companies at a lower price, betting that demand will rise, he said.

Exco fell 77 cents, or 4.4 percent, to $16.64 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 14 percent this year.

Enough Premium?

Miller didn’t return two phone calls seeking comment. Vincent J. Cebula, identified in company filings as the chairman of the special committee, also didn’t return calls seeking comment.

“The question is, is the special committee going to approve that deal, is that really enough of a premium for the committee to say, ‘that works,’” said Leo Mariani, an analyst with RBC Capital Markets in Austin. Mariani rates Exco’s shares at “sector perform” and owns none.

Miller, who is also the chairman, said in November that the company was undervalued because of falling gas prices. Prices have averaged $4.289 this year, after reaching $13.577 in July 2008.

Three of the four largest Exco shareholders joined Miller in the previous bid: Dallas billionaire T. Boone Pickens, Oaktree Capital Management LLC and Ares Capital Management LLC.

Third Buyout

If approved, the deal would be Miller’s third buyout of Exco. The former Coda Energy Inc. executive bought 51 percent of Exco in 1997, leaving the rest of the shares publicly traded, and became CEO.

In 2003, he took the company private through a buyout with backing from Cerberus Capital Management LP. He listed shares again in 2006.

Barclays Plc and Evercore Partners Inc. have been serving as financial advisers to Exco’s special committee considering the offer, and Kirkland & Ellis LLP and Jones Day are its legal advisers. JPMorgan Chase & Co. and Goldman Sachs Group Inc. are advising Miller, the company said previously.

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