Amplify Energy and Midstates Petroleum have signed a definitive merger agreement, according to which, Amplify merges with a subsidiary of Midstates in an all-stock merger-of-equals.
Under the terms of the merger agreement, Amplify Energy stockholders would receive 0.933 shares of newly issued Midstates common stock for each share of its common stock.
The merger is expected to be closed in the third quarter of 2019, where stockholders of both the companies would own 50% each of the outstanding shares of the combined company.
The combined company is planned to be headquartered in Houston and the Amplify president and chief executive officer Ken Mariani will lead the combined company.
Mariani said: “Amplify and Midstates are both well positioned to generate significant free cash flow from proved developed producing assets, and we believe that stockholders of both companies will benefit from the reduced costs and enhanced scale achieved by this transaction.
“The combined company’s strong balance sheet, liquidity and free cash flow create additional capacity to return capital to stockholders and support improved market performance.
“In addition, we believe that there are significant benefits in continuing to increase scale in this market, and moving forward we intend to consider other opportunistic combinations and acquisitions that create value through cost synergies and free cash flow accretion.”
The combined entity is expected to have a strong balance sheet and liquidity that will allow for acceleration of capital return programs. With a current enterprise value of $729m, the company company is expected to obtain benefits of scale, as it combines two PDP-weighted independent producers.
UBS Investment Bank is the financial advisor to Amplify for the transaction, while Houlihan Lokey Capital served as financial advisor to Midstates.
Midstates president and chief executive officer David Sambrooks said: “This merger-of-equals with Amplify is exactly the type of value maximizing transaction we hunted for when we announced our strategic review process earlier this year.
“The stock-for-stock combination provides for substantial value enhancing synergies and the potential to accelerate additional capital returns moving forward, creating significant value for shareholders of both Midstates and Amplify.