Under the terms of the merger agreement, Pinnacle stockholders will receive 0.6584 shares of Quest common stock for each share of Pinnacle common stock they own.
Based on the closing market prices for the shares of both companies on October 15, 2007, the combined company would have an equity market capitalization of approximately $450 million and Pinnacle stockholders will receive Quest common stock worth approximately $207 million. It is anticipated that Quest's current stockholders will own approximately 55% of Quest following the merger and Pinnacle's current stockholders will own the remaining approximately 45%.
The merger is expected to be tax free to stockholders of both companies.
"This transaction creates a geographically diversified, CBM-focused company with significant reserve potential. This acquisition is consistent with Quest's long-term strategy to acquire and develop significant unconventional resource opportunities to support the growth of our planned upstream MLP strategy. We believe that we are now poised to grow into a leading independent unconventional resource company," said Jerry D. Cash, Quest's Chairman, President and Chief Executive Officer.
"The combination of Quest and Pinnacle is an excellent fit and builds substantial scale for our stockholders. The merger combines dominant acreage and operating positions in two prolific low risk resource plays with over one million acres under lease that will allow considerable growth in production, reserves and pipeline development," said Peter G. Schoonmaker, Pinnacle's President and Chief Executive Officer.
Following the merger, Jerry Cash will continue to serve as Chairman, President and CEO and as a director of Quest. The Board of Directors of Quest will consist of seven directors, four designated by Quest and three designated by Pinnacle.
Additional Information about the Merger
As a result of the merger, Pinnacle will survive as a wholly owned subsidiary of Quest. Quest will continue to be listed on the Nasdaq Stock Market.
The merger is subject to various conditions, including approval of the stockholders of both Quest and Pinnacle and other customary conditions.
It is anticipated that the closing of the merger will occur in the first or second quarter of 2008.
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