LINN Energy, LinnCo to Buy Berry Petroleum for $4.3B
LINN Energy, LLC (Nasdaq: LINE), LinnCo, LLC (Nasdaq: LNCO) and Berry Petroleum Company (NYSE: BRY) today announced the signing of a definitive merger agreement pursuant to which LINN and LinnCo will acquire all of Berry's outstanding shares for total consideration of $4.3 billion, including the assumption of debt. The transaction, which is structured as a stock-for-stock merger of Berry with LinnCo followed by the acquisition of the Berry assets by LINN, is expected to be tax-free to Berry shareholders. This transaction represents the first ever acquisition of a public C-Corp by an upstream LLC or MLP.
* Berry's long-life, low-decline, mature assets are an excellent fit for an MLP/LLC; * Meaningful growth to LINN's portfolio with increased geographic presence in California, the Permian Basin, East Texas, and the Rockies, as well as the addition of an attractive new core area in the Uinta Basin; * Production of approximately 240 MMcfe/d, increasing LINN's current production by 30 percent; * Berry's reserves are approximately 75 percent oil, which results in a meaningful increase in liquids exposure to 54 percent from 46 percent of proved reserves, pro forma as of December 31, 2012; * Proved reserves of approximately 1.65 Tcfe, increasing LINN's estimated proved reserves by 34 percent; * LINN has identified additional probable and possible reserves at Berry of approximately 3.8 Tcfe; * Approximately 3,200 producing wells and more than 200,000 net acres; and * Potential for production optimization and cost savings.
* The transaction is expected to be highly accretive to distributable cash flow per unit. In the first full year following closing, accretion is expected to be in excess of $0.40 per unit. * LINN plans to recommend to its board of directors an increase in the current quarterly distribution of 6.2 percent. LINN's current quarterly distribution of $0.725 per unit, or $2.90 per year, would increase to $0.77 per unit, or $3.08 per year. The recommended increase is anticipated to take effect in the quarter immediately following the closing of the transaction, which is estimated to occur on or before June 30, 2013. * LinnCo's current estimated annual dividend of $2.84 per share includes a reduction of $0.06 per share for taxes, which LinnCo now estimates to be zero for 2013. Therefore, management estimates that the LinnCo dividend per share for the quarter ended March 31, 2013 will increase 2 percent from $0.71 to $0.725 per quarter, or $2.90 per share on an annual basis. * LinnCo's management intends to recommend to its board an increase in LinnCo's dividend by 8.5 percent following the closing of the transaction to $3.08 per share on an annualized basis, which includes the $0.18 per share increase in LINN distributions. * Due to the significant accretion expected from this transaction, LINN's coverage ratio for the second half of 2013, assuming the transaction closes on or before June 30, 2013, is expected to be approximately 1.20x including the anticipated distribution and dividend increases. * All stock consideration and greatly increased size are expected to result in significantly improved debt metrics. * As part of the transaction, Berry will be converted into a limited liability company and then it will be contributed to LINN in exchange for LINN units. This arrangement allows LINN to own Berry's assets in a pass-through entity without any immediate payment of tax.
© 2015 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.