Linn Energy to buy Berry Petroleum in $2.5 billion stock deal

Thu Feb 21, 2013 8:07am EST
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(Reuters) - Oil and gas producer Linn Energy LLC LINE.O will buy Berry Petroleum Co BRY.N for $2.5 billion in stock, boosting its reserves of lucrative oil and raising total output by about a third.

Berry shareholders will receive 1.25 shares of LinnCo LLC LNCO.O, a company set up by Linn to raise money for acquisitions and other purposes. LinnCo, which went public in October, only owns Linn units and has no assets or operations.

Berry shareholders will get an equivalent of $46.24 per share based on LinnCo stock's closing price of $36.99 on Wednesday. This is a 19.8 percent premium to Berry's closing price of $38.59.

Berry had 54.15 million shares outstanding as of October 26. The deal is valued at $4.3 billion including debt, the companies said.

Berry shares rose 14 percent in premarket trade.

Linn's offer is higher than Berry's intrinsic value of $44.06 as measured by Thomson Reuters StarMine.

The StarMine model is a measure of a stock's current value when considering analysts' growth estimates for five years, and then modeling the typical growth trajectory over a longer period of time.

The acquisition will increase Linn's footprint in California, Texas's Permian Basin, besides adding acreage in Utah's Uinta Basin.

The addition of properties will bring in about 240 million cubic feet equivalent per day (mmcfe/d) of production, raising Houston-based Linn's output by 30 percent.   Continued...