Regency Energy Partners (NYSE:RGP) revealed a $3.8 billion play on Thursday for rival natural gas pipeline operator PVR Partners (NYSE:PVR), which operates more than 4,750 miles of pipeline.
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Based in Radnor, Pa., PVR went public in October 2001 and has natural gas processing capacity of 460 million cubic feet a day. The company has just 300 employees but generated 2012 revenue of $1.01 billion.
The acquisition allows Regency, which has an existing footprint in the Permian Basin, South Texas and North Louisiana, to add PVR’s assets in Appalachia and the Mid-Continent region.
Dallas-based Regency agreed to pay cash and stock worth $28.68 per PVR share, representing a 25.7% premium on its Wednesday closing price of $22.81.
“This acquisition enhances our overall geographic diversity by providing Regency with a strategic presence in two prolific producing areas, the Marcellus and Utica shales in the Appalachian Basin and the Granite Wash in the Mid-Continent region," Regency CEO Michael Bradley said in a statement.
Including the assumption of $1.8 billion of debt, the enterprise value of the deal rises to $5.6 billion.
The companies expect to keep the Regency name and maintain the Dallas headquarters after closing, which is seen in the first quarter of 2014. Bradley will remain CEO, while Regency Chief Financial Officer Thomas Long will keep his position.
"We view this transaction as a merger creating a larger, more diversified operating platform that will be highly attractive to investors, customers, creditors and employees,” PVR CEO William Shea, Jr. said in a statement.
Shres of Regency retreated 4.08% to $26.69 Thursday morning, while PVR soared 15.02% to $26.24.
Bank of America Merrill Lynch (NYSE:BAC) and UBS (NYSE:UBS) advised Regency on the deal, while Citigroup (NYSE:C) and Evercore Partners (NYSE:EVR) advised PVR.