Activist fund Mangrove Partners critiques Denbury deal to buy Penn Virginia
30 October 2018. By Brian Baker.
Activist investment fund Mangrove Partners on Tuesday expressed skepticism about the proposed purchase price offered by Denbury Resources for Penn Virginia, saying the company's "standalone prospects are currently undervalued in the marketplace."
But another investor, Strategic Value Partners, disclosed in a separate filing on Tuesday that it intends to vote its 10.2 percent stake in favor of the deal.
Mangrove said in its filing that while a sale of Penn Virginia could be good for shareholders, "we believe that a control transaction should include the payment of a sustainable premium to shareholders of the target company.”
Mangrove, which owns a 9.5 percent stake in Penn Virginia, said the company's shares are undervalued, and it said it had noted the market's reaction to the deal.
Penn Virginia's stock closed at $67.39 on Friday before the deal was announced, and opened at $71.32 Monday morning. However, shares closed at 66.45 on Tuesday, shortly before Mangrove filed with the US Securities and Exchange Commission.
Mangrove stopped short of saying it would oppose the deal. "Mangrove Partners is evaluating Denbury Resources Inc.'s proposed acquisition of Penn Virginia," the fund said.
In arguing that the stock is undervalued, Mangrove cited its "strong operational performance, highly economic well results, significant cash flow, and guidance for 40%-60% production growth in 2019."
Shareholders representing 15 percent of Penn Virginia shares have signed an agreement to vote in favor of the transaction, the companies said in the press release announcing the deal.
Denbury Resources and Penn Virginia, which are independent oil and natural gas companies, announced on Sunday that they had entered into a definitive merger agreement that values Penn at $1.7 billion, including the assumption of debt. Penn shareholders would receive 12.4 shares of Denbury Resources and $25.86 in cash for each share of Penn they own.
The companies said they expect the deal, which is subject to shareholder approval, to close in the first quarter of 2019.
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