Regency Energy's acquisition of PVR Partners includes $1.8 billion debt

By Lisa Kerner

Charlotte, N.C., Oct. 10 - Regency Energy Partners LP announced it will acquire PVR Partners, LP in a unit-for-unit transaction plus a one-time cash payment of $40 million to PVR unitholders. The transaction is valued at about $5.6 billion, including the assumption of net debt of $1.8 billion.

"We believe this combination with PVR delivers compelling value to both sets of unitholders, offers significant benefits to our customers and is keeping with our long-term investment-grade rating objective," Regency president and chief executive officer Mike Bradley said during a conference call on Thursday to discuss the transaction.

The combined company will have total pro forma growth capital of $770 million and full-year combined leverage of 4.5 times.

Both companies' boards of directors have approved the deal, which is expected to close in the first quarter of 2014. PVR

PVR president and CEO Bill Shea, who is not staying with the company post-transaction, said the merger allows PVR to grow more easily than it could have done on a stand-alone basis.

"The size will allow better access to less costly capital so that the current growth projects in the backlog of growth projects can be financed in the most advantageous way," he said.

Regency chief financial officer Tom Long said that the company has always targeted leverage at about four times. He feels "very comfortable" that the combined company will be at this range "as we look over the next year" and "manage the balance sheet with equity and debt."

When asked about PVR's debt, specifically $1.3 billion of outstanding bonds, Long said no decisions have been made regarding the debt.

Although not asked, Long did not specify if Regency would use cash from the balance sheet or debt for the cash portion of the deal.

Deal terms

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 of about $40 million.

Total consideration to be received by PVR unitholders is valued at $28.68 per common unit based on Regency's closing price as of Oct. 9, a 25.7% premium to the closing price of PVR's common units of $22.81 on Oct. 9 and a 24.8% premium to the volume-weighted average closing price of PVR's common units for the last 10 trading days ended Oct. 9.

Mike Bradley will lead the combined company, with its headquarters located in Dallas.

Dallas-based Regency Energy is involved in the gathering, processing and transportation of natural gas and the transportation and storage of natural gas liquids.

PVR is a Radnor, Pa.-based owner and manager of coal and natural resource properties and midstream natural gas gathering and processing businesses.

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