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Linn Energy, LLC (LINE) Message Board

  • rlp2451 rlp2451 Feb 21, 2013 7:04 AM Flag

    Linn to Buy Berry Petroleum for $4.3B

    HOUSTON and DENVER, Feb. 21, 2013 (GLOBE NEWSWIRE) -- LINN Energy, LLC (LINE), LinnCo, LLC (LNCO) and Berry Petroleum Company (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.
    Operational Highlights
    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.
    Financial Highlights
    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.
    "This transaction creates tremendous value for LINN Energy, LinnCo and Berry equityholders. We are pleased to have been able to achieve such a mutually beneficial outcome," said Mark E. Ellis, Chairman, President and Chief Executive Officer, LINN Energy. "Berry's assets are an excellent fit for LINN, and we believe this transaction generates significant accretion to our distributable cash flow per unit."
    "We have great respect for what the Berry management team has accomplished and consider the Berry employees to be an important part of this transaction," added Ellis. "We welcome them to LINN and believe that together, we will be positioned for great success in the future."
    Robert Heinemann, President and Chief Executive Officer, Berry Petroleum Company, said, "Today's merger announcement with LINN Energy marks the beginning of a new, important chapter in our company's history. Berry and LINN have demonstrated the ability to prudently grow their businesses while delivering value and returns to their respective shareholders and unitholders. Berry's portfolio fits well with LINN's structure and asset base, and the combination of the two companies will create one of the largest independent E&P companies in North America. This transaction consideration delivers substantial value to Berry shareholders with the opportunity to participate in the upside potential of the combined, growing company."
    Transaction Terms & Structure
    Under the terms of the agreement, which was unanimously approved by the boards of directors of LINN Energy, LinnCo and Berry, LinnCo has agreed to issue 1.25 common shares for each common share of Berry outstanding prior to the merger. The consideration to be received by Berry shareholders is valued at $46.2375 per Berry share based on LinnCo's closing price as of February 20, 2013. This represents a premium of 19.8 percent to the Berry closing price on February 20, 2013, and a premium of 23.1 percent to its one month average price at that date.
    The acquisition, which is expected to be tax-free to Berry's shareholders, is structured as a stock-for-stock merger. In connection with the merger Berry will be converted into an LLC. Upon completion of the merger, LinnCo will contribute the Berry assets to LINN in exchange for LINN units.
    In connection with approval of the contribution from LinnCo to LINN Energy, the boards of directors of each company formed a conflicts committee to evaluate any potential conflicts that may arise between LINN and LinnCo. To ensure the independence of each of the conflicts committees, two directors resigned from the LinnCo board of directors to serve on the LINN conflicts committee and two directors resigned from the LINN board of directors to serve on LinnCo's conflicts committee. In addition, in connection with the transaction, one representative of the board of directors of Berry will be appointed to the board of either LINN or LinnCo.
    The transaction is subject to the approval of the shareholders of Berry and LinnCo and the unitholders of LINN Energy, as well as customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The transaction is expected to close by June 30, 2013. The combined company will be headquartered in Houston, Texas.

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    • After fighting back earlier this week against questions about its accounting practices for hedges, Linn Energy (LINE) uses its richly valued stock to pay a 20% premium for Berry Petroleum (BRY). Tudor Pickering says the master limited partnersip's $2.5B purchase "makes sense" as it looks to increase its portfolio of "long lived, sallow decline assets." Firm says the "considerable premium" LINE is paying for BRY is "doable given their lower cost of capital and focus on repeatability rather than growth." LINE up 4% pre-market and LinnCo (LNCO) the former unit the deal is being done through gains 4.8%, while BRY jumps 21%.

    • LINE and RLP are on a roll this morning with this news and an increase in distribution for the 3rd 1/4.. As well LINE beat by a penny .40 was but .41 is what they came in at.

      Amazing what a little news will do...........

    • Wow! What a buy! Kolja really outdid himself on this one.

    • that is a big surprise to me. i happen to own BRY stock also so might just end up with more LINE but most of all hope this is good for LINE

 
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