Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "The combination of these two Dallas based companies creates an organization that is stronger and in better position to compete than either would be independently. Both companies have adhered to a focused growth strategy as active acquirers and consolidators. At the same time, each company has been very active and highly successful with the drill bit. These strategies, along with Magnum Hunter's existing exploration program, will be greatly enhanced by this larger platform."
Mr. Philip B. Smith, Chairman and CEO of Prize stated, "Magnum Hunter has demonstrated an excellent exploration track record. The exploration inventory of Magnum Hunter combined with the exploitation opportunities of Prize offer our shareholders an excellent opportunity for future growth. In addition, the Prize shareholders will enjoy substantially increased liquidity in their securities."
Under the terms of the definitive agreement, Prize shareholders will receive $24.00 per common share payable in 2.50 shares of Magnum Hunter common stock for each share of Prize Energy plus a cash component that will be determined based upon a sliding scale with a minimum of $0.25 per share (Magnum Hunter market price of $9.50 per share or greater) to a maximum of $5.25 per share (Magnum Hunter market price of $7.50 per share or less). The market price of the Magnum Hunter common stock is defined as the average price of Magnum Hunter common stock during the 20 trading day period ending on the fourth trading day prior to closing. The parties have certain rights to terminate the transaction, should such market price be outside of the designated collar.
With respect to the stock portion of the transaction, the merger is expected to be non-taxable to the shareholders of both companies. The Board of Directors of both companies have unanimously approved the merger. The merger will remain subject to shareholder approval and other conditions. As a result, Prize shareholders will own approximately 49 percent of the combined company and Magnum Hunter shareholders will own approximately 51 percent.
The accounting method to be used for the merger is expected to be "purchase accounting." Magnum Hunter expects to remain on the "full cost" method of accounting.
Mr. Gary C. Evans will remain Chairman, President and CEO and Magnum Hunter's executive staff will continue in their current capacities. The size of Magnum Hunter's Board of Directors will remain the same, however, two Prize independent board members will replace two existing independent directors of Magnum Hunter.
Based upon estimates and projections provided by both companies, the merger will be accretive to Magnum Hunter shareholders on a proved reserves and net asset value basis. Additionally, the merger is expected to be accretive on many financial measures as well as significantly lowering the debt-to-equity ratio of Magnum Hunter at closing. At December 31, 2000, total proved reserves were 367 billion cubic feet equivalent (Bcfe) for Magnum Hunter and 593 Bcfe for Prize Energy.
The transaction is subject to approval by the shareholders of both companies and other customary closing conditions. The largest shareholder of Prize Energy, Natural Gas Partners V, L.P., representing over 50% ownership, has agreed to vote in favor of the merger. Both companies intend to hold special shareholders' meetings as soon as practicable. The companies anticipate filing a Registration Statement on Form S-4 with the Securities and Exchange Commission in January 2002. Completion of the merger is anticipated to occur in the first quarter of 2002.
Most Popular Articles