By Lisa Kerner
Charlotte, N.C., July 15 - Edge Petroleum Corp. said it agreed to be acquired by Chaparral Energy, Inc. in an all-stock transaction that will result in Chaparral becoming a publicly traded company.
According to an Edge news release, the company's common stockholders will receive 0.2511 shares of Chaparral common stock for each share of Edge common stock they own.
Holders of Edge's 5.75% cumulative convertible perpetual preferred stock will receive one share of Chaparral 5.75% series A cumulative convertible perpetual preferred stock for each Edge convertible preferred they own, the release noted.
A termination fee of $15 million is included in the agreement, it was reported in a form 8-K filed with the Securities and Exchange Commission.
The boards of directors of both companies, as well as Chaparral shareholders, have approved the merger agreement. Closing of the transactions remains subject to approval by Edge stockholders.
Once the merger is complete, Chaparral stockholders will own approximately 86% of the outstanding common stock of the combined company, with Edge stockholders owning the remaining 14%.
The combined company is expected to trade on the New York Stock Exchange under the symbol "CPR."
"We are extremely excited about this transaction as it allows us to achieve two of our corporate strategic initiatives of increasing our production and cash flow and also accessing the public equity markets," Chaparral chief executive officer, president and co-founder Mark Fischer said in the release.
"As we disclosed when we began our review of strategic alternatives late in 2007, our primary goal was to ultimately execute a transaction that would enhance value for Edge stockholders," Edge CEO John Elias said in the release.
"The combined company will have the stability of Chaparral's production profile and long reserve life with long-term growth potential from their exciting CO2 EOR (enhanced oil recovery) program combined with our short-term growth potential through our established exploration program," Elias added.
Fischer will continue as the chairman, CEO and president, and the company will continue to be based in Oklahoma City using Edge's headquarters as a regional office in Houston.
Chaparral said it expects its nine-member board of directors to include at least two independent members from Edge's board.
Magnetar Capital, in connection with the merger agreement, agreed to provide a $150 million series B convertible preferred investment. The series B convertible preferreds will pay a 6.5% annual cash dividend or, at Chaparral's discretion, an 8% payable-in-kind dividend. Closing of the series B convertible preferreds is contingent on the closing of the merger.
Proceeds from the private placement will be used to reduce debt, fund the combined company's capital program and for general corporate purposes, the release said.
Also in conjunction with the merger, Chaparral received a financing commitment for a new credit facility led by JPMorgan.
It was reported that the initial borrowings under the facility will be used to refinance Chaparral's and Edge's existing credit facilities.
The initial borrowing base will be either $825 million or $1 billion, based on the amount of additional hedges put in place, while the availability at closing is expected to be about $375 million, the release stated.
Sun Trust Robinson Humphrey and RBS Greenwich Capital advised Chaparral. Lead placement agent for the series B convertible preferreds is SunTrust Robinson Humphrey along with co-placement agent J.P. Morgan Securities, Inc.
Edge, a Houston-based oil and natural gas company, is being advised by Merrill Lynch, Pierce, Fenner & Smith Inc.
Chaparral is an Oklahoma City-based oil and natural gas production and exploitation company.
| Acquirer: | Chaparral Energy, Inc.
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| Target: | Edge Petroleum Corp.
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| Announcement date: | July 15
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| Price per share: | 0.2511 shares of Chaparral common stock
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| Termination fee: | $15 million
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| Expected closing: | Upon approvals
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| Stock price of target: | Nasdaq: EPEX: $4.69 on July 14
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