Deal-making in the oil patch continued on Thursday, as Linn Energy agreed to buy the Berry Petroleum Company for about $2.5 billion, expanding its presence in oil-rich shale formations.
Under the terms of the deal, an affiliate of Linn, LinnCo L.L.C., will issue 1.25 million new common shares for each Berry share. That amounts to $46.24 a share, a premium of roughly 20 percent to Berry’s closing price on Wednesday.
LinnCo will then transfer Berry’s assets to Linn in exchange for additional ownership units in its sibling, which is structured as a master limited partnership. Including the assumption of debt, the deal is valued at $4.3 billion.
By purchasing Berry, Linn will significantly bolster its oil production and increase its holdings in California and the Permian Basin in western Texas. The company estimates that its newest acquisition will increase its proven reserves by 34 percent and its production capabilities by 30 percent. And Berry’s reserves are estimated to be about 75 percent oil and liquids, considered to be significantly more valuable than natural gas, given current prices.
Linn cited the growth promised by the deal in announcing an increase in its quarterly distributions to unit holders, to 77 cents a unit from 72.5 cents.
“Berry’s assets are an excellent fit for Linn, and we believe this transaction generates significant accretion to our distributable cash flow per unit,” Mark E. Ellis, Linn’s chief executive, said in a statement. “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.”
To help defray the tax consequences LinnCo will take on in the deal, Linn will pay its affiliate $6 million a year through 2015.
LinnCo was advised by Citigroup, while a conflicts committee of its board was advised by Evercore Partners and the law firm Locke Lord. A conflicts committee of Linn’s board was advised by Greenhill & Company and Akin Gump Strauss Hauer & Feld.
Latham & Watkins served as legal counsel to both Linn and LinnCo. Berry was advised by Credit Suisse and the law firm Wachtell, Lipton, Rosen & Katz.
DealBook: Linn Energy to Buy Berry Petroleum for $2.5 Billion
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DealBook: Linn Energy to Buy Berry Petroleum for $2.5 Billion
