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TheStreet Open House

Acquisition Of QR Energy, LP By Breitburn Energy Partners LP May Not Be In Shareholders' Best Interests

Stocks in this article: BBEPQRE

SAN DIEGO & HOUSTON, July 24, 2014 /PRNewswire/ -- Shareholder rights attorneys at Robbins Arroyo LLP are investigating the proposed acquisition of QR Energy, LP (NYSE: QRE) by Breitburn Energy Partners LP (NASDAQ: BBEP).  On July 24, 2014, the two companies announced the signing of a definitive merger agreement pursuant to which Breitburn will acquire QR Energy.  Under the terms of the agreement, QR Energy common and class B unit holders will 0.9856 units of Breitburn common units, for a total consideration of $22.48 per unit.

Robbins Arroyo LLP.

Is the Proposed Acquisition Best for QR Energy and Its Shareholders?

Robbins Arroyo LLP's investigation focuses on whether the board of directors at QR Energy is undertaking a fair process to obtain maximum value and adequately compensate QR Energy shareholders.

As an initial matter, the $22.48 merger consideration represents a premium of 19.1% based on QR Energy's closing price on July 23, 2014.  This premium is significantly below the average one-day premium of 46.12% for comparable transactions in the past three years.  Further, the $22.48 merger consideration is below the target price set by a target price of $23.00 set by an analyst at Landenburg Thalmann & Co. on September 18, 2013. 

On July 24, 2014, simultaneous to the merger announcement, QR Energy released its preliminary operational and financial results for the company's second quarter 2014, reporting solid increases over the prior quarter.  Specifically, the company reported total revenue of $133.3 million, an increase of 9% compared to the previous quarter.  QR Energy's average production reached 20,264 Boe per day, an increase of 8% compared to the previous quarter, and the company's adjusted EBITDA increased 7% to $69.6 million. QR Energy also reported that its distributable cash flows increased 13% over the previous quarter, reaching $34.9 million

In light of these facts, Robbins Arroyo LLP is examining QR Energy's board of directors' decision to merge the company now rather than allow shareholders to continue to participate in the company's continued success and future growth prospects.

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