Summary
Diamondback Energy, Inc. (FANG) filed an 8-K on November 16, 2018, primarily to supplement its proxy statement related to the proposed merger with Energen Corporation. This filing addresses recent shareholder litigation filed against both companies concerning the merger. To resolve these lawsuits, Diamondback and Energen have agreed to voluntarily supplement their disclosures, providing additional information to investors regarding the background of the merger and the financial analyses performed by their respective financial advisors, J.P. Morgan and TPH. The supplemental disclosures include details on the initial outreach to potential counterparties during Energen's strategic review process, exclusivity agreements, and extensive financial analyses comparing the merger's transaction multiples to those of precedent transactions in the Midland and Delaware Basins, as well as broader E&P sector corporate transactions. These analyses provide context on valuations based on acreage, production, and EBITDAX, aiming to substantiate the fairness of the proposed merger terms.
Key Highlights
- 1Diamondback Energy and Energen have reached an agreement to resolve three shareholder lawsuits filed in connection with their proposed merger.
- 2The resolution involves voluntarily supplementing the joint proxy statement/prospectus with additional disclosures.
- 3Supplemental disclosures provide more detail on the background of the merger, including the number of companies initially contacted and those that entered into non-disclosure agreements.
- 4Financial advisor J.P. Morgan's 'Transaction Multiples Analysis' is updated with specific comparable transactions in the Midland and Delaware Basins and broader E&P corporate transactions, providing valuation ranges for Energen based on acreage and EBITDAX.
- 5Financial advisor TPH's 'Precedent Transaction Multiples' analysis is updated, comparing Energen's transaction multiples (reserves, production, EBITDAX) to public company and private company/asset transactions in the Permian Basin, as well as observed premiums in similar deals.
- 6The filing emphasizes that these supplemental disclosures are not an admission of the legal necessity or materiality of the information but are made to alleviate litigation costs and risks and provide additional investor information.
- 7Both companies believe the claims in the lawsuits are without merit and deny all allegations.