SEC’s Linn Energy Inquiry Could Delay Berry Petroleum Deal

Linn Energy

The Securities and Exchange Commission’s recent inquiry into Linn Energy LLC (NASDAQ:LINE) could delay its acquisition of Berry Petroleum Company (NYSE:BRY)’s deal, RBC Capital Markets feels.

Linn Energy

The SEC’s recent inquiry could also increase share exchange ratio for acquiring Berry Petroleum Company (NYSE:BRY), according to analysts at RBC Capital Markets in their recent equity research report.

Earlier, Linn Energy LLC (NASDAQ:LINE), along with its former unit LinnCo LLC (NASDAQ:LNCO), disclosed that both companies are the subject of an informal U.S. Securities and Exchange Commission inquiry, related in part to LinnCo’s proposed merger with Berry Petroleum Company (NYSE:BRY).

John Ragozzino and team at RBC feel the informal inquiry by the SEC is quite common. The inquiry relates to issues pertaining to a proposed merger with Berry Petroleum, certain non-GAAP financial performance and Linn Energy’s hedging policy.

The analysts view positively the SEC’s disclosure that its inquiry should not be construed as the commission’s negative view on Linn Energy and the company’s voluntary disclosure of the SEC inquiry. The analysts feel these should augur well for the independent oil and natural gas company.

Linn Energy Inquiry Could Delay Berry Petroleum Deal

RBC Capital’s analysts feel till the SEC’s inquiry is concluded, the proposed buyout plan will not see much material progress.

John Ragozzino and team also note in view of substantial fall in the price of LinnCo, an increased exchange ratio may be necessary to finalize the deal to acquire Berry Petroleum. They reckon the share exchange ratio should be enhanced by 11 percent in order to return the Berry Petroleum’s offer to the level of premium implied at the time of the offer.

The RBC analysts assigned ‘outperform’ rating to Linn Energy LLC (NASDAQ:LINE)’s stock in view of its strong balance sheet strength, besides having a secure cash distribution enhancing strong yield.

Interestingly, RBC’s analysts outperform rating contrasts with downgrading by two analyst firms J.P. Morgan and Raymond James.

Earlier, we covered an interesting bull and bear case for Linn Energy LLC (NASDAQ:LINE).

The share price of Linn Energy declined at nearly three year low levels after the company disclosed that the SEC’s inquiry against the company and its subsidiary.

Earlier, chairman and CEO of Omega Advisors Leon Cooperman, resonated a bullish tone on Linn Energy saying his company is confident about Linn Energy’s professionalism and management integrity.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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