Vanguard Natural Resources and Encore Energy announced the execution of a definitive agreement that would result in a merger whereby Encore would become a wholly-owned subsidiary of Vanguard's operating company, Vanguard Natural Gas, LLC, through a unit-for-unit exchange. Under the terms of the definitive agreement, Encore's public unitholders would receive 0.75 Vanguard common units in exchange for each Encore common unit they own at closing, representing a premium of approximately 4.4% based on the closing prices of Encore common units and Vanguard common units on March 24, 2011, the last trading day before Vanguard announced its initial proposal to acquire all of the common units of Encore owned by the public and an approximately 51% premium over the December 31, 2010 purchase price paid to Denbury for 45.6% of the Encore common units. The transaction would result in approximately 18.4 million additional common units being issued by Vanguard. The deal is valued at an approx. $998 million. The terms of the definitive agreement were unanimously approved by the members of the Encore Conflicts Committee, who negotiated the terms on behalf of Encore and is comprised solely of independent directors. In addition, Jefferies & Company, Inc., has issued a fairness opinion to the Encore Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to the unaffiliated unitholders of Encore. The members of the Vanguard Conflicts Committee, which is also comprised solely of independent directors, negotiated the terms on behalf of Vanguard and also voted unanimously in favor of the merger. In addition, RBC Capital Markets has issued a fairness opinion to the Vanguard Conflicts Committee stating that they believe the exchange ratio is fair, from a financial point of view, to Vanguard.
"We are pleased to announce our agreement to combine these two companies in a transaction that would simplify our commercial activities and organizational structure as well as lower our overall cost of capital," said Scott W. Smith, president and chief executive officer of Vanguard.
The merger is expected to provide benefits to current Vanguard unitholders by, among other things:
"We fully support the combination of these two successful companies," said John Jackson, chairman of the Encore Conflicts Committee. "We believe Encore's public unitholders will benefit from Vanguard's future growth potential."
The merger is expected to benefit Encore's public unitholders by, among other things:
The completion of the merger is subject to approval by a majority of the outstanding Encore common units. Vanguard's operating company, Vanguard Natural Gas, LLC, already owns Encore's general partner and approximately 45.6% of the Encore outstanding common units and has also executed the definitive agreement between Vanguard and Encore. The completion of the merger is also subject to the approval of the issuance of additional Vanguard common units in connection with the merger by the affirmative vote of a majority of the votes cast by Vanguard unitholders. Completion of the merger, assuming the requisite unitholder votes are obtained and subject to other customary terms and conditions, is expected to occur during the fourth quarter of 2011. Distributions will continue to be paid by each company pursuant to their own cash distribution policies while the merger is pending.
Most Popular Articles
From the Career Center
Jobs that may interest you