Bonanza Creek Acquires HighPoint Resources
NYSE-listed Bonanza Creek Energy Inc. has entered into a definitive merger agreement to acquire Denver-based HighPoint Resources Corp. in a corporate transaction valued at approximately US$376 million, payable via stock and issuance of new debt. The transaction has been unanimously approved by the board of directors of both companies.
Under the terms of the agreement, HighPoint shareholders will receive 0.114 shares of Bonanza for each share of HighPoint held. Based on approximately 4.3 million HighPoint shares outstanding, Bonanza will issue around 5 million shares, currently valued at US$16.08 per share (based on the closing share price on November 6th).
In addition, the companies have also agreed to commence a registered exchange offer and consent solicitation of a pre-packaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code. Pursuant to the exchange offer, US$635 million of Senior Notes of HighPoint will be exchanged for approximately 9.3 million shares of Bonanza, and up to US$100 million aggregate principal amount of newly issued 7.50% Bonanza senior notes due 2026.
Adjusting for approximately US$158 million worth of Bonanza common shares issued to HighPoint shareholders and noteholders, the issuance of up to US$100 million of Bonanza senior notes to HighPoint noteholders in connection with the exchange offer, and the assumption of remaining debt of US$125 million (as of September 30th, 2020), the total implied transaction value is approximately US$376 million on an enterprise value basis.
The transaction will result in Bonanza shareholders owning approximately 68% of the combined company, and HighPoint’s stakeholders owning the remaining approximately 32%. The board of directors of the combined company will consist of seven members, with five directors from Bonanza and two selected by HighPoint’s supporting noteholders.
“The combination of Bonanza Creek and HighPoint creates significant scale in the rural DJ Basin, which will immediately increase free cash flow generation. The combination of our complementary asset bases will yield significant synergies and represents a transformative transaction for Bonanza Creek,” stated Eric Greager, President & CEO of Bonanza.
NYSE-listed HighPoint Resources is an independent E&P company focused on operations targeting oil & natural gas properties in the DJ basin of the United States, and currently holds 142,587 net acres in Colorado and Wyoming. The company reported Proved (1P) Reserves of approximately 127.4 million barrels of oil equivalent (MMboe) as of December 31st, 2019, of which 76% was liquids. Production from the assets averaged 30,913 barrels of oil equivalent per day (boe/d) during Q3-2020.
Tudor, Pickering, Holt & Co. and Perella Weinberg Partners are serving as financial advisors to HighPoint, while Evercore is advising Bonanza on the deal.
The consummation of the pre-packaged plan will be subject to customary closing conditions, including the confirmation by the Court, and the execution of a transaction support agreement and other related documents. The Bonanza-HighPoint transaction is expected to close in Q1-2020.