HOUSTON ( The Deal) -- Breitburn Energy Partners ( BBEP) said Thursday it agreed to acquire QR Energy ( QRE) for $3 billion, creating the largest oil-weighted oil and gas exploration and production master limited partnership.
The deal values QR Energy's equity at $1.6 billion.
Los Angeles-based Breitburn will exchange 72 million of its units for all of QR Energy's common and Class B units at a ratio of 0.9856 of a Breitburn unit for each QRE unit, which works out to $22.48 per unit - a 19% premium over QR Energy's closing price of $18.87 on Wednesday.
The $3 billion transaction value includes QR Energy's debt of around $984 million as of March 31 and outstanding Class C convertible preferred units, the holders of which will get $350 million in cash.
The deal comes with an $80 million breakup fee, Breitburn management said on a conference call with analysts and investors.
Ethan Bellamy, an analyst at Robert W. Baird, said the price is fair to Houston-based QR Energy, but based on a modest 3.5% accretion to Breitburn, QRE holders shouldn't anticipate a material sweetener from here, he noted. However, QR Energy holders will also receive a distribution increase, adding to the attractiveness of the proposal.
"We do not anticipate any problem getting this transaction completed at the current ratio and in the time frame they outlined," he said. "There should not be any HSR or FTC issues, and QRE holders have a nice enough premium here to be satisfied. Both groups of unitholders should be better off in our view with a much more liquid, scaled operation that is better positioned to compete for accretive acquisitions and to high grade their capital portfolio."