Regency Energy Partners LP (“Regency”) and PVR Partners, L.P. (“PVR”) announced that their respective boards of directors have unanimously approved a definitive merger agreement, pursuant to which Regency will acquire PVR. This acquisition will be a unit-for-unit transaction plus a one-time cash payment to PVR unitholders that collectively imply a value today for PVR of approximately $5.6 billion, including the assumption of net debt of $1.8 billion.
The transaction, which is expected to close in the first quarter of 2014, will create a leading gas gathering and processing platform with a scaled presence across North America's premier high-growth unconventional oil and gas plays in Appalachia, West Texas, South Texas, the Mid-Continent and North Louisiana. The combination continues to build on Regency’s fee-based cash flows. The combination is expected to be slightly dilutive to 2014 DCF, but is not expected to affect anticipated cash distribution growth in 2014; moreover, the enhanced scale, balance sheet strength and diversification are expected to provide substantial EBITDA and DCF growth over time. Specifically, the acquisition better positions the combined company to capitalize on the long-term growth momentum of North American gas production through incremental, high-value expansions around its core asset base, as well as other growth and acquisition opportunities.
“This acquisition enhances our overall geographic diversity by providing Regency with a strategic presence in two prolific producing areas, the Marcellus and Utica shales in the Appalachian Basin and the Granite Wash in the Mid-Continent region” said Michael J. Bradley, president and chief executive officer of Regency. “These are tremendously complementary businesses, and as a result, we expect the increased footprint and scale to create significant synergies and provide substantial organic growth opportunities that will continue to support our goal of increasing distributions and creating unitholder value.”
“We view this transaction as a merger creating a larger, more diversified operating platform that will be highly attractive to investors, customers, creditors and employees,” said William H. Shea, Jr., president and chief executive officer of PVR. “We believe that the size and scope of the combined enterprise will be highly beneficial to our unitholders, offering added diversification and critical mass which will provide the needed financial flexibility to fully execute and benefit from the significant portfolio of organic growth projects we have developed over the past three years, especially in our Eastern midstream operations.”
Under the terms of the definitive agreement, holders of PVR common units, Class B Units and Special Units will receive 1.020 common units of Regency for each PVR unit held. In addition, PVR unitholders will receive a one-time cash payment at closing of the merger estimated to be approximately $40 million in the aggregate. The consideration to be received by PVR unitholders is valued at $28.68 per common unit based on Regency’s closing price as of October 9, 2013, representing a 25.7% premium to the closing price of PVR’s common units of $22.81 on October 9, 2013, and a 24.8% premium to the volume weighted average closing price of PVR’s common units for the last 10 trading days ending October 9, 2013.