Denbury Resources Inc. (NYSE:DNR) entered into a definitive agreement to acquire Penn Virginia Corporation (NASDAQ:PVAC) from a group of sellers for $1.2 billion on October 28, 2018. The transaction values Penn Virginia at approximately $1.7 billion, including the assumption of debt. The consideration to be paid to Penn Virginia common stockholders will consist of 12.4 shares of Denbury common stock and $25.86 of cash for each share of Penn Virginia common stock or $79.8 in cash without interest or 18.3454 shares of Denbury common stock. Each restricted stock unit will be paid a combination of 12.4 shares of Denbury common stock and $25.86 of cash for each share. The overall mix of consideration will be 68% Denbury common stock and 32% cash. The stock portion of the consideration received by Penn Virginia's shareholders is expected to be tax-free. The consideration represents a value to each Penn Virginia shareholder of $79.80 per share based on the closing price of Denbury common stock on October 26, 2018. Penn Virginia shareholders will be permitted to elect all cash, all stock or a mix of stock and cash, subject to proration, which will result in the aggregate issuance of approximately 191.6 million Denbury shares and payment of $400 million in cash, $483 million of net debt will be assumed by Denbury. Until the closing of transaction both the entities will continue to operate as independent entities.

The transaction followed a strategic review process undertaken by Penn Virginia. Upon closing of the transaction, Denbury stockholders will own approximately 71% of the combined company, and Penn Virginia shareholders will own approximately 29%. Denbury intends to finance the purchase with a combination of equity (issued to Penn Virginia shareholders), debt and cash on hand. Denbury has received a financing commitment letter from JPMorgan Chase Bank N.A. for a new $1.2 billion senior secured bank credit facility, replacing its current facility under which no amounts are currently outstanding, and a $400 million senior secured second lien bridge financing. The two new debt financings will be used to fully or partially fund the $400 million cash portion of the consideration, potentially retire and replace Penn Virginia's $200 million second lien term loan, replace Penn Virginia's existing bank credit facility, which had $283 million drawn and outstanding as of September 30, 2018, and pay fees and expenses. The merger agreement contains a covenant that upon its closing, Denbury's Board of Directors will be expanded from eight Directors to ten Directors, to include two independent members of Penn Virginia's board of directors who are mutually agreed upon by Denbury and Penn Virginia.

The transaction is subject to the approval of Penn Virginia shareholders and is subject to approval by Denbury's stockholders of the issuance of common stock and an amendment to Denbury's charter to increase its authorized shares, registration statement on Form S-4 having been declared effective by the U.S. Securities and Exchange Commission, Denbury Common Stock issuable in connection with the merger having been authorized for listing on the New York Stock Exchange. The transaction is also conditioned on clearance under the Hart-Scott Rodino Act and other customary closing conditions. The transaction was unanimously approved by the Board of Directors of each company, and Penn Virginia shareholders holding 15% of the outstanding shares signed a voting agreement to vote “for” the transaction. As of December 27, 2018, Federal Trade Commission granted the early termination notice. As of February 13, 2019, Contrarian Capital Management, L.L.C. delivered a letter to Penn Virginia's Board of Directors opposing the proposed merger between Penn Virginia and Denbury Resources Inc. stating that as of February 12, 2019, merger undervalues Penn Virginia and Denbury's business will likely struggle at prevailing oil prices while Penn Virginia will flourish. On March 6, 2019, Mangrove Partners recommended the shareholders of Penn Virginia Corporation to vote against the merger proposal, as it undervalues Penn Virginia, among other reasons. The special meeting of shareholders will be held on April 17, 2019. The transaction is expected to close in the first quarter of 2019. The combination is expected to be accretive to cash flow per share and other key per-share metrics.

Lackland Bloom, Eric Rutkoske, Jeremy Griggs and Carlos Rivero from Guggenheim Securities LLC acted as financial advisors to Denbury. Michele Jones, Meghann Altman, Arina Mavilian, R.A. McDonough and Jack Smith from J.P. Morgan Securities LLC acted as financial advisors to Denbury with respect to capital structure and financial aspects of the transaction. Ananth Shankar and Stephen Straty from Jefferies LLC acted as financial advisors to Penn Virginia. Jeffery B. Floyd, Stephen M. Gill, Atma Kabad, Alex Robertson, David Bumgardner, Todd Hartis, Key Hemyari, Madison Guidry, Lina Dimachkieh, Guy Gribov, David D'Alessandro, Bryan Loocke, Sean Becker, Larry Nettles, Billy Vigdor and Steve Abramowitz from Vinson & Elkins LLP acted as legal advisors to Denbury. Leif B. King, Frank E. Bayouth, Christopher Baeza, Meryl Chae, Karen L. Corman, K. Kristine Dunn, Don Frost, Michelle Gasaway, Erica Schohn and Sally Thurston of Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisors to Penn Virginia. Hillary H. Holmes, Tull Florey, Justin Stolte, Shalla Prichard, James Chenoweth, Sean Feller, Harrison Tucker, Eric Haitz, Tino Salazar, Whitney Bosworth, James Robertson and Dave Cias from Gibson, Dunn & Crutcher LLP acted as legal advisors to Penn Virginia. Bill Sheehan, Catherine Burns, Art Robinson, Ben Heriaud, Matt Petrone, Jon Cantor, Jasmine Hay, Jeanne Annarumma, Tatiana Mejia-Uribe and Mike Isby of Simpson Thacher are advising J.P. Morgan as financial advisors to Denbury. Thomas Brandt of Latham & Watkins advised Guggenheim Partners as financial advisor to Denbury Resources. Jack Bodner, David Schwartzbaum and Clay Collett of Covington & Burling LLP acted as legal advisors for Penn Virginia Corporation. Broadridge Corporate Issuer Solutions, Inc. acted as transfer agent of Denbury. American Stock Transfer & Trust Company, LLC acted as transfer agent to Penn Virginia. MacKenzie Partners acted as proxy solicitor to Denbury and will be paid a retainer of $25,000. Okapi Partners LLC acted as proxy solicitor to Penn Virginia and will be paid a retainer of $15,000. Guggenheim will be paid total fee of $13 million. Saratoga Proxy Consulting, LLC acted as proxy solicitor in the transaction. Hunton Andrews Kurth LLP acted as legal advisor to Penn Virginia. Penn Virginia has agreed to pay Jefferies a transaction fee of approximately $13.8 million, $0.75 million of which became payable upon delivery of Jefferies' opinion and is creditable against the transaction fee, and the remainder of which is payable contingent upon the consummation of the transaction.