Penn Virginia Corporation (NASDAQ: PVAC) has revealed that it has entered into a definitive merger agreement with Lonestar Resources US Inc. (OTCQX: LONE) to acquire the company in an all-stock transaction.
Under the terms of the deal, which is valued at approximately $370 million, Lonestar shareholders will receive 0.51 shares of common stock of Penn Virginia for each share of common stock of Lonestar outstanding, Penn Virginia noted. The transaction, which is expected to close in the second half of this year, has been unanimously approved by the boards of directors of both companies, Penn Virginia highlighted.
The closing of the deal is subject to customary closing conditions, including the approval of Penn Virginia and Lonestar shareholders. Shareholders holding approximately 80 percent of the voting power of Lonestar, and approximately 60 percent of the voting power of Penn Virginia, have executed binding support agreements committing them to vote their shares for the transaction, Penn Virginia revealed.
Upon completion of the transaction, Penn Virginia shareholders will own approximately 87 percent of the combined company and Lonestar will own approximately 13 percent. Following completion, Lonestar will have the right to nominate one independent director to the Penn Virginia board. Edward Geiser will continue to serve as chairman of the board and Darrin Henke will continue to serve as president and chief executive officer of the business following the closing of the deal.
“This is an exciting time for Penn Virginia as we expand our Eagle Ford footprint with the high-quality assets of Lonestar,” Henke said in a company statement.
“This transaction further solidifies the company’s position as a premier Eagle Ford operator and provides additional scale and synergies while still delivering operational excellence. Consistent with our disciplined strategy, this transaction is expected to be accretive to free cash flow and certain other key per share metrics to deliver long-term value to shareholders,” he added.
“The benefits of basin consolidation are very compelling and we strongly believe this is a value-creating opportunity for both companies. We remain steadfast in our disciplined approach to running the business and continue to be committed to free cash flow generation, capital discipline, maximizing cash-on-cash returns, and protecting the environment,” Henke went on to say.
Commenting on the merger, Lonestar’s chief executive officer, Frank D. Bracken, III, said, “in today’s environment, size and scale are paramount, both in terms of operations and in the public markets”.
“The merger exposes Lonestar shareholders to a substantially larger, more liquid, publicly-listed platform and the combination of the two companies’ high quality, liquids-focused operations should provide significant benefit to both shareholder groups, positioning the Company as a dominant force in the Eagle Ford Shale,” he added.
Penn Virginia describes itself as a pure-play independent oil and gas company engaged in the development and production of oil, NGLs, and natural gas, with operations in the Eagle Ford shale in south Texas. Lonestar is an independent oil and natural gas company based in Fort Worth, Texas, which is focused on the development, production, and acquisition of unconventional oil, NGLs, and natural gas properties in the Eagle Ford Shale in Texas.