Item 8.01 Other Events.
Update Regarding Litigation Related to the Merger
As previously announced, on
Litigation Related to the Merger
Seven complaints have been filed with respect to the merger as of
The Gaines and Marc actions were filed by purported Vine stockholders and assert
claims against Vine,
The Stockholder Actions generally allege violations of Section 14(a), Rule 14a-9, and Section 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), premised on a purported failure to disclose material information primarily related to Vine and Chesapeake's financial projections, the financial analyses of Vine's and/or Chesapeake's financial advisors and the timing and nature of communications regarding post-transaction employment, directorships and benefits. The Stockholder Actions seek injunctive relief enjoining the merger and damages and costs, among other remedies.
Although the Company cannot predict the outcome of or estimate the possible loss or range of loss from these matters, Vine and the Vine Board believe that the respective claims asserted against them in the Stockholder Actions are meritless.
Supplemental Proxy Statement Disclosure
The Company does not believe, with respect to the complaints in which the Company is named, that supplemental disclosures are required or necessary under applicable laws. However, in order to minimize the expense of defending the Stockholder Actions, and without admitting any liability or wrongdoing, the Company is electing to make the supplemental disclosures to the Proxy Statement/Prospectus set forth below in response to the Stockholder Actions and solely for the purpose of mooting the allegations contained therein. The Company denies the allegations
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of the seven complaints, and denies any violation of law. The Company believes that the Proxy Statement/Prospectus disclosed all material information required to be disclosed therein, and denies that the supplemental disclosures are material or are otherwise required to be disclosed. The Company is disclosing this information solely to eliminate the burden and expense of litigation. Nothing in the supplemental disclosures should be deemed an admission of the legal necessity or materiality of any supplemental disclosures under applicable laws.
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SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS
This supplemental information should be read in conjunction with the Proxy Statement/Prospectus, which should be read in its entirety. Page references in the below disclosures are to the pages in the Proxy Statement/Prospectus, and defined terms used but not defined herein have the meanings set forth in the Proxy Statement/Prospectus. Without admitting in any way that the disclosures below are material or otherwise required by law, the Company makes the following amended and supplemental disclosures. For clarity, new text within amended and restated paragraphs from the Proxy Statement/Prospectus, is highlighted with bold, underlined text.
The section of the Proxy Statement/Prospectus entitled "The Merger-Opinion of Vine's Financial Advisor-Vine Financial Analyses" is amended and supplemented as follows:
The disclosure on page 64 of the Proxy Statement/Prospectus below the subheading
"Vine Financial Analyses" is modified by inserting the following paragraph after
the words "
The low, high, median and mean values for the selected companies in this
analysis for (i) the enterprise value to estimated calendar year 2021 Average
Daily Production multiples were
The disclosure on page 64 of the Proxy Statement/Prospectus below the subheading "Vine Financial Analyses" is modified by amending and restating the first sentence in the third full paragraph in its entirety as follows:
Taking into account the results of the selected companies analysis and based on
its experience and professional judgment, Houlihan Lokey applied selected
multiple ranges of
The disclosure on page 65 of the Proxy Statement/Prospectus below the subheading "Vine Financial Analyses" is modified by inserting the following paragraph after the first chart:
The low, high, mean and median values for the production based metrics in the
selected transactions in the analysis for (i) the implied value per mcfepd were
The disclosure on page 65 of the Proxy Statement/Prospectus below the subheading "Vine Financial Analyses" is modified by amending and restating the first sentence in the first full paragraph in its entirety as follows:
Taking into account the results of the selected transactions analysis and based
on its experience and professional judgment, Houlihan Lokey applied selected
multiple ranges of
The disclosure on page 65 of the Proxy Statement/Prospectus below the subheading "Vine Financial Analyses" is modified by amending and restating the second and third full paragraphs in their entirety as follows:
Corporate Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted
cash flow analysis of Vine by calculating the estimated net present value of the
projected unlevered, after-tax free cash flows of Vine based on the Adjusted
Free Cash Flow shown in the Vine Projections, adjusted for interest expense and
associated taxes. Houlihan Lokey calculated terminal values for Vine by applying
a range of terminal value multiples of 3.0x to 4.0x to Vine's EBITDAX based on
the Vine Projections for fiscal year 2025. The net present values of Vine's
projected future cash flows and terminal values were then calculated using
weighted average cost of capital ("WACC") discount rates for Vine ranging from
7.0% to 8.0% calculated using the capital asset pricing model. The Vine
discounted cash flow analysis indicated an implied per share value reference
range of
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Net Asset Value Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted cash flow net asset value ("NAV") analysis of Vine by calculating the estimated net present value of its estimated gas reserves in each of the 1P Reserves and 3P Reserves categories for Vine based on the Vine Reserve Information. Houlihan Lokey performed this analysis using risk adjusted discount rates ("RADR") ranging from 10% to 50% for the 3P Reserves, based on its experience and professional judgment and depending on the reserve categories, and WACC discount rates for Vine ranging from 7.0% to 8.0%, calculated using the capital asset pricing model, for the 1P Reserves, for each of NYMEX Strip Pricing and Consensus Pricing scenarios. Houlihan Lokey used this to derive net reserve value reference ranges. Houlihan Lokey then derived implied equity value and implied exchange ratio per share reference ranges from the resulting reserve value reference ranges and using the net debt and diluted share information described above. This analysis indicated the following per share reference ranges and implied exchange ratio reference ranges for the Vine Class A common stock:
The section of the Proxy Statement/Prospectus entitled "The Merger-Opinion of Vine's Financial Advisor-Chesapeake Financial Analyses" is amended and supplemented as follows:
The disclosure on page 66 of the Proxy Statement/Prospectus below the subheading
"Chesapeake Financial Analyses" is modified by inserting the following paragraph
after the words "
The low, high, median and mean values for the selected companies in this
analysis for (i) the estimated calendar year 2021 Average Daily Production
multiples were
The disclosure on page 66 of the Proxy Statement/Prospectus below the subheading "Chesapeake Financial Analyses" is modified by amending and restating the first sentence in the fourth full paragraph in its entirety as follows:
Taking into account the results of the selected companies analysis and based on
its experience and professional judgment, Houlihan Lokey applied selected
multiple ranges of
The disclosure on page 67 of the Proxy Statement/Prospectus below the subheading "Chesapeake Financial Analyses" is modified by amending and restating the first chart in its entirety as follows:
Date Announced Buyer Seller 6/8/2021 Contango Oil & Gas Company Independence Energy* 6/2/2021 Southwestern Energy Company Indigo II Louisiana Operating LLC† 5/6/2021 EQT Corporation ARD Operating† 5/24/2021 Cabot Oil & Gas Corporation Cimarex Energy* 12/21/2020 Diamondback Energy QEP Resources, Inc.* 9/28/2020 Devon Energy WPX Energy* 8/12/2020 Southwestern Energy Montage Resources† 7/20/2020 Chevron Corporation Noble Energy* 7/15/2019 Callon Petroleum Company Carrizo Oil & Gas, Inc.* 6/10/2019 Comstock Resources, Inc. Covey Park Energy LLC† 4/24/2019 Occidental Petroleum Anadarko Petroleum* 8/27/2018 Eclipse Resources Blue Ridge Mountain Resources Inc.† 4
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6/19/2017 EQT Corporation Rice Energy Inc.† EQT Corporation Republic Energy, Trans Energy 10/25/2016 Inc.† Rice Energy Inc. Vantage Energy LLC, Vantage Energy 9/26/2016 II LLC† 7/5/2016 Mountain Capital Management Harbinger Group Inc.†
* Multi-basin corporate transactions.
† Gas weighted corporate transactions.
The disclosure on page 67 of the Proxy Statement/Prospectus below the subheading "Chesapeake Financial Analyses" is modified by inserting the following paragraph after the first chart:
The low, high, mean and median values for the production based metrics in the
selected multi-basin corporate transactions for (i) the implied value per mcfepd
multiples were
The disclosure on page 67 of the Proxy Statement/Prospectus below the subheading "Chesapeake Financial Analyses" is modified by amending and restating the first sentence in the fourth full paragraph in its entirety as follows:
Taking into account the results of the selected transactions analysis and based
on its experience and professional judgment, Houlihan Lokey applied selected
multiple ranges of
The disclosure on pages 67 and 68 of the Proxy Statement/Prospectus below the subheading "Chesapeake Financial Analyses" is modified by amending and restating the fifth full paragraph of page 67 and the first full paragraph of page 68 in their entirety as follows:
Corporate Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted
cash flow analysis of Chesapeake by calculating the estimated net present value
of the projected unlevered, after-tax free cash flows of Chesapeake based on the
Adjusted Free Cash Flow shown in the Chesapeake Projections, adjusted for
interest expense and associated taxes. Houlihan Lokey calculated terminal values
for Chesapeake by applying a range of terminal value multiples of 4.0x to 5.0x
to Chesapeake's EBITDAX based on the Chesapeake Projections for fiscal year
2025. The net present values of Chesapeake's projected future cash flows and
terminal values were then calculated using WACC discount rates for Chesapeake
ranging from 7.5% to 8.5%, calculated using the capital asset pricing model. The
Chesapeake discounted cash flow analysis indicated an implied per share value
reference range of
Net Asset Value Discounted Cash Flow Analysis. Houlihan Lokey performed a discounted cash flow NAV analysis of Chesapeake by calculating the estimated net present value of its estimated oil and gas reserves in each of the 1P Reserves and 3P Reserves categories for Chesapeake based on the Chesapeake Reserve Information. Houlihan Lokey performed this analysis using RADRs ranging from 10% to 50% for the 3P Reserves, based on its experience and professional judgment and depending on the reserve categories, and WACC discount rates ranging from 7.5% to 8.5% for Chesapeake, calculated using the capital asset pricing model, for the 1P Reserves, for each of NYMEX Strip Pricing and Consensus Pricing scenarios. Houlihan Lokey used this to derive
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implied net reserve value reference ranges. Houlihan Lokey then derived implied
equity value per share reference ranges from the resulting reserve value
reference ranges and using the net debt and diluted share information described
above. This analysis indicated the following per share reference ranges for
Chesapeake common stock, and, when multiplied by the adjusted exchange ratio of
0.2486 and added to the cash consideration of
Additional Information and Where to Find It
In connection with the proposed merger (the "Proposed Transaction") of Vine and
Chesapeake, Chesapeake has filed with the
Participants in The Merger Solicitation
Vine, Chesapeake and certain of their respective directors, executive officers
and other members of management and employees may be deemed to be participants
in the solicitation of proxies from Vine's stockholders with respect to the
Proposed Transaction. Information about Vine's directors and executive officers
is available in Vine's registration statement on Form S-1, as amended, which was
originally filed with the
No Offer or Solicitation
This communication is not intended to and shall not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking Statements
Certain statements in this Current Report on Form 8-K concerning the merger between Vine and Chesapeake, including any statements regarding the results, effects, benefits and synergies of the proposed transaction, future opportunities for the combined company, future financial performance and condition, guidance, the tax treatment of the proposed transaction, the timing and amount of future production of natural gas, the hedging strategy and results,
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future drilling plans and cost estimates, competition and government regulation, the impact of the COVID-19 pandemic, changes to cash flow generation, anticipated liquidity, anticipated cash general and administrative savings and any other statements regarding Vine's or Chesapeake's future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are "forward-looking" statements based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "probable," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "would," "potential," "may," "might," "anticipate," "likely" "plan," "positioned," "strategy," and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, failure to obtain the required votes of Vine's stockholders to approve the transaction and related matters; the risk that a condition to closing of the Proposed Transaction may not be satisfied, that either party terminate the merger agreement or that the closing of the Proposed Transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Vine and Chesapeake; the effects of the merger of Vine and Chesapeake, including the combined company's future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies and other benefits in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity price changes; and the risks of oil and gas activities. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.
Additional factors that could cause results to differ materially from those
described above can be found in Vine's registration statement on Form S-1, as
amended, which was originally filed with the
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Vine nor Chesapeake assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
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