Eclipse Resources and Blue Ridge Mountain Resources to merge
Combined companies’ enterprise value: $1.4 billion
Eclipse Resources Corporation (ticker: ECR) and Blue Ridge Mountain Resources, Inc. (ticker: BRMR) have entered into a definitive merger agreement under which Eclipse Resources and Blue Ridge will combine in an all-stock transaction, the companies said in a news release.
Blue Ridge stockholders will receive consideration consisting of 4.4259 shares of Eclipse Resources common stock for each share of Blue Ridge common stock, before adjustment for a 15-to-1 reverse stock split of Eclipse Resources common stock to be effected concurrently with closing of the transaction.
Based on the closing price of Eclipse Resources common stock on August 24, 2018, the transaction implies an enterprise value for the combined company of approximately $1.4 billion and an equity value of approximately $908 million.
President and CEO of Blue Ridge, John Reinhart will become president and CEO of the combined company and will lead a management team that leverages both companies’ proven operating expertise in the basin, according to the press release.
The merger will create one of the largest Utica focusedoperators with Q4 2018 estimated production of 500-560 MMcfe per day, the companies said.
Terms of the transaction
Under the terms of the transaction, a newly-formed subsidiary of Eclipse Resources will be merged into Blue Ridge, with Blue Ridge surviving as a wholly-owned subsidiary of Eclipse Resources. Upon closing of the transaction, existing Eclipse shareholders will own approximately 57.5% of the outstanding shares of the combined company and Blue Ridge shareholders will own approximately 42.5%.
EnCap Investments, owning collectively approximately 57% of the outstanding shares of common stock of Eclipse Resources, has entered into a voting agreement with Eclipse Resources and Blue Ridge to, among other things, provide the written consents approving the transaction, which have been delivered by them concurrently with the signing of the merger agreement.
Certain stockholders of Blue Ridge owning approximately 60% of the outstanding shares of common stock of Blue Ridge have entered into a voting agreement with Eclipse Resources and Blue Ridge to, among other things, vote or provide written consents in favor of approval of the transaction, subject to certain terms and conditions.
The transaction is expected to close in the fourth quarter of 2018.
Organization and leadership
It is anticipated that there will be four direct reports to the CEO:
- Matthew DeNezza, the current executive vice president and CFO of Eclipse Resources, will serve as the interim CFO for the combined company through November 30, 2018 or until the permanent CFO is publicly announced prior to November 30, 2018.
- Oleg Tolmachev, the current executive vice president and COO of Eclipse Resources, will continue to serve the combined company in that capacity.
- Paul Johnston, currently senior vice president and general counsel of Blue Ridge, will become executive vice president and general counsel of the combined company.
- Matthew Rucker, currently vice president resource planning and development of Blue Ridge, will become senior vice president resource planning and development for the combined company.
At closing, the board of directors of Eclipse Resources will become a declassified board and will consist of a total of ten directors, five designated by Eclipse Resources and five designated by Blue Ridge (one of whom will be CEO John Reinhart).
Pro forma transaction highlights
- Liquidity: $312 million near term liquidity including an estimated $150 million increase in the borrowing base under the company’s revolving credit facility at close and no near-term debt maturities
- Growth: Self-funded 2-3 rig business plan targeting annual production growth greater than 20% and becoming cash flow generating in 2020.
