By Lisa Kerner
Charlotte, N.C., Oct. 16 - The boards of directors of Quest Resource Corp. and Pinnacle Gas Resources, Inc. unanimously approved a stock-for-stock merger to create a combined company with an equity market capitalization of some $450 million.
Under the terms of the companies' definitive merger agreement, Pinnacle stockholders will receive 0.6584 of a share of Quest common stock for each share of Pinnacle common stock they own or a total of about $207 million. Quest stockholders will own approximately 55% of Quest following the merger, with Pinnacle's current stockholders owning the remaining 45%, according to a form 8-K filing with the Securities and Exchange Commission.
The merger is slated to close in the first or second quarter of 2008. Pinnacle will survive as a wholly owned subsidiary of Quest. A termination fee of $1 million to $3 million is included in the agreement.
"This transaction creates a geographically diversified, [coalbed methane]-focused company with significant reserve potential," Quest chairman, president and chief executive officer Jerry D. Cash said in a company news release.
"This acquisition is consistent with Quest's long-term strategy to acquire and develop significant unconventional resource opportunities to support the growth of our planned upstream MLP strategy."
Cash will continue as chairman, president, CEO and as a director of Quest. Quest's board will consist of seven directors, four designated by Quest and three designated by Pinnacle.
Quest was advised by Friedman, Billings, Ramsey & Co., Inc. and Stinson Morrison Hecker LLP. Pinnacle was advised by Jefferies Randall & Dewey, a division of Jefferies & Co., Inc., and Andrews Kurth LLP.
Quest is a natural gas producer based in Oklahoma City.
Pinnacle is an independent energy company based in Sheridan, Wyo.
| Acquirer: | Quest Resource Corp.
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| Target: | Pinnacle Gas Resources, Inc.
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| Transaction total: | $207 million
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| Price per share: | 0.6584 of a Quest share
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| Termination fee: | $1 million to $3 million
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| Announcement date: | Oct. 16
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| Expected closing: | First or second quarter of 2008
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| Stock price for acquirer: | Nasdaq: PINN: $4.86 on Oct. 15
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| Stock price for target: | Nasdaq: QRCP: $9.47 on Oct. 15
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