Oil and gas company Denbury Resources Inc. (DNR) Wednesday announced the closing of its acquisition of Encore Acquisition Co. (EAC). Denbury also entered into a new $1.6 billion 24-bank credit facility and briefly extended its tender offers for Encore senior subordinated notes.
The company stated that the merger closed Tuesday evening following approval by the stockholders of both Denbury and Encore at meetings held in the morning and subsequent completion of closing documentation. In the merger, Denbury issued approximately 134.4 million shares of its common stock and paid approximately $829.4 million in cash to Encore stockholders.
The number of Denbury shares issued to Encore public holders represents an exchange ratio of 2.4048 Denbury shares and $15 in cash for each previously outstanding share of Encore common stock, based on an overall 30% cash and 70% stock pro ration of the overall consideration, subject to different ratios for all-cash and all-stock elections made by Encore stockholders. The Denbury shares issued to Encore stockholders will represent approximately 33.9% of Denbury's issued and outstanding common stock after the merger, based upon Denbury shares outstanding at January 31.
Denbury said that with the merger it becomes one of the largest oil-focused independent oil and natural gas companies in the U.S. The combined company will continue to be known as Denbury Resources Inc. with headquarters in Plano, Texas. Trading in Encore's common stock on the New York Stock Exchange has been terminated after market close on March 9.
In the merger, J.P. Morgan Securities Inc. acted as exclusive financial advisor to Denbury and Barclays Capital Inc. acted as exclusive financial advisor to Encore.
Baker & Hostetler LLP acted as counsel to Denbury, and Baker Botts L.L.P. and Latham & Watkins LLP was the counsel to Encore.
Further, Denbury announced its intention to accept for purchase all of Encore's senior subordinated notes tendered by holders pursuant to cash tender offers and related consent solicitations commenced on February 8 for $600 million aggregate principal amount of three series of outstanding Encore senior subordinated notes.
The company stated that as of 5:00 p.m. Eastern Time on March 9, tenders and consents had been received with respect to $108.22 million aggregate principal amount, or 72%, of Encore's outstanding 6.25% Senior Subordinated Notes due 2014. The company has also received tenders and consents with respect to $268.80 million aggregate principal amount, or 90%, of Encore's outstanding 6.0% Senior Subordinated Notes due 2015, and $123.52 million aggregate principal amount, or 82%, of Encore's outstanding 7.25% Senior Subordinated Notes due 2017.
Denbury also stated that the expiration of the cash tender offers and consent solicitations for notes of these series has been extended until 10:00 a.m., Eastern Time on March 10.
The company will finance the purchase of tendered notes with a portion of the net proceeds from its $1 billion of 8 1/4% Senior Subordinated Notes due 2020 sold early last month. Denbury will assume Encore's position as obligor on the remainder of all Encore senior subordinated notes which remain outstanding. The company will also notify the holders, within 30 days after consummation of the merger, of their right to resell those notes to Denbury at 101% of the face amount.
Further, Denbury said that if the principal amount of the Encore notes purchased pursuant to the tender offers and the subsequent rights of holders to sell the remaining notes to Denbury totals less than $600 million, the company will redeem that portion of its 8 1/4% Senior Subordinated Notes Due 2020 in a principal amount equal to the difference between $600 million and the aggregate principal amount of Encore notes so purchased, at 100% of face value of its 8 1/4% notes, plus interest accrued and unpaid to but not including the date of redemption.
Additionally, Denbury said that it entered into a new credit agreement with JPMorgan Chase Bank, N.A. and 23 other lenders. The agreement provides for an initial borrowing base and aggregate lenders' commitment of $1.6 billion. The facility is secured by substantially all of the company's producing oil and natural gas properties and JPMorgan Chase is the administrative agent of the agreement.
Denbury expects that about $600 million to $700 million will remain available under the credit facility after draws to fund the Encore merger.
DNR closed Tuesday's trading at $15.43, up $0.14 or 0.92%, on a volume of 61.83 million shares.
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