EnerJex, Black Raven Enter Merger Agreement
Entered a merger agreement to acquire the private oil and natural gas E&P company.
EnerJex Resources Inc. (OTCQB: ENRJ) entered into a merger agreement to acquire Black Raven Energy Inc., a privately held oil and natural gas E&P company.
Upon consummation of the merger, each share of Black Raven common stock will be converted into 0.34791 of a common share of EnerJex, subject to certain adjustments, resulting in Black Raven stockholders owning approximately 37% of the post-merger company on a diluted basis.
Following the merger, the combined enterprise will be a Midcontinent-focused independent oil and natural gas E&P company with a deep inventory of low-risk drilling opportunities and exposure to emerging unconventional oil resource plays through its sizeable acreage footprint in the Denver-Julesburg (DJ) Basin.
Terms of the Transaction
The exchange ratio of 0.34791 of a share of EnerJex common stock for each Black Raven share was established based on a negotiated value of $0.70 per EnerJex share. On July 22, the last trading day preceding the execution of the merger agreement, the over-the-counter price quoted for an EnerJex share was $0.54.
Based on a negotiated value of $0.70 per share of EnerJex common stock, this transaction represents an implied price per share for Black Raven of $0.24. Aggregate consideration in the transaction is expected to be $45 million based on the assumed issuance of approximately 43.5 million shares of EnerJex common stock and the anticipated assumption by EnerJex of $15 million of additional long-term debt in order to discharge or acquire Black Raven's existing debt. EnerJex thinks that it will be able to obtain this funding through traditional bank financing. Shareholders of Black Raven other than West Coast Opportunity Fund LLC (WCOF) may elect to receive $0.40 per share in cash, up to an aggregate amount of $600,000, in lieu of EnerJex common stock.
Black Raven is majority-owned by WCOF, which currently owns 16% of EnerJex and will own 46% of the post-merger Company on a diluted basis. Affiliates of WCOF own 24% of EnerJex and will own 15% of the post-merger company on a diluted basis. Two members of EnerJex's board of directors are affiliated with WCOF and one such member serves on Black Raven's board of directors and is the chairman of its audit committee.
The company's board of directors created a special transactions committee consisting of its two independent directors to evaluate this transaction and negotiate the merger agreement on behalf of EnerJex's stockholders. The committee engaged independent counsel, Kirkland & Ellis LLP, along with an independent financial advisor, Stifel, Nicolaus & Co. Inc., to advise the committee throughout this process. Black Raven's board of directors also created an independent special committee to negotiate the merger agreement on behalf of Black Raven and to represent the interests of Black Raven stockholders. Following a rigorous evaluation and negotiation process and the receipt from Stifel of an opinion as to the fairness of the transaction, from a financial point of view, to the company, the committee voted unanimously in favor of the transaction and recommended that the company's board of directors vote in favor of the transaction and approve the merger agreement. The affiliated directors abstained from voting and the remainder of EnerJex's board of directors voted unanimously in favor of the transaction and to recommend to EnerJex's stockholders that they approve the issuance of EnerJex shares in the merger.
The issuance of EnerJex common stock pursuant to the merger is subject to the approval of the stockholders of EnerJex. In addition, the transaction is subject to certain other customary closing conditions. WCOF has delivered its written consent to the transaction, providing the majority vote required to approve the transaction for Black Raven. The merger is expected to close before the end of 3Q 2013.
Management Comments
"I am excited to announce this transformative transaction and I am very thankful to everyone involved at both companies for their time and efforts throughout this process. Black Raven's team will complement EnerJex's team and add a significant amount of depth and talent in areas that do not overlap between the two companies,” said Robert Watson Jr., EnerJex’s CEO, in the release.
EnerJex Resources, Inc. is an independent energy company engaged in the acquisition, exploitation, development, and production of crude oil properties in the U.S. The company is headquartered in San Antonio, Texas.