Mangrove Partners Files Definitive Proxy Statement and Releases Important Letter to Shareholders of
Penn Virginia Corporation
Urges Fellow Shareholders to Vote Against the Ill-Advised and Undervalued Merger with Denbury Resources, Inc. at the
Upcoming April 17th Special Meeting
NEW YORK, March 6, 2019 -- The Mangrove Partners Master Fund, Ltd., one of Penn Virginia Corporation’s largest shareholders, owning 11.4% of
the outstanding shares, today announced that it has filed its definitive proxy statement and released a letter to the shareholders of Penn Virginia Corporation (NASDAQ: PVAC).
The full text of the letter is copied below:
March 6, 2019
Dear Fellow Shareholders:
We write to ask you to join us in voting against the proposed merger between Penn Virginia Corporation (“Penn Virginia”) and Denbury
Resources Inc. (“Denbury”) at the upcoming April 17th Special Meeting by voting AGAINST the merger proposals on the enclosed GOLD proxy card. The Mangrove Partners Master Fund, Ltd. and its affiliates (“Mangrove”) are long term shareholders owning 11.4% of Penn Virginia’s
common stock. We strongly oppose the proposed merger and strongly believe the transaction, which is payable to Penn Virginia shareholders in a combination of both Denbury stock and cash, is not in the best interests of Penn Virginia shareholders.
Specifically, Mangrove believes that:
The proposed merger is terrible for Penn Virginia shareholders. Should the transaction be completed, the combined company would have a higher cost structure,
lower margins, a reduced growth rate, a significantly weaker balance sheet, and a more expensive valuation than Penn Virginia currently enjoys on a standalone basis.
The proposed merger undervalues
Penn Virginia. Since shortly after the merger was announced on October 28, 2018, Penn Virginia stock has persistently traded above the market value of the merger consideration. Rather than being paid a significant and sustainable
premium, the proposed merger asks Penn Virginia shareholders to accept a discount to the current market value of Penn Virginia shares of over 12%.1
1 Based on closing prices as of March 5, 2019.
Denbury’s financial leverage
represents an unacceptable risk for Penn Virginia shareholders. Mangrove believes that Denbury, with its high cost structure and $2.5 billion of net debt,2
may become insolvent should current or lower oil prices persist. This concern was on full display late last year as oil prices dropped into the $40s and the yield on Denbury’s unsecured notes spiked above 20%. Despite the recovery in oil
prices to the mid $50s, Denbury’s bonds continue to trade at distressed levels with yields of approximately 15%.3 Denbury plans to incur over $900 million in
additional debt as part of the proposed merger.
The shortcomings of the proposed
merger were immediately recognized by the market and remain obvious. On the first trading day following the announcement, the common stock of Denbury
Resources dropped 24% and underperformed the S&P Oil & Gas Exploration and Production Select Industry Index by over 20%. In the time since then, the decline in Denbury’s common stock has grown to over 57% and its underperformance
to over 50%.4
Given these factors, we ask a simple yet fundamental question: what benefit does this merger provide to you as a Penn Virginia shareholder? We understand that the proposed merger may help to address Denbury’s excessive leverage and inability to grow, but we do not believe that helping
Denbury with its problems is a relevant goal for Penn Virginia’s shareholders.
Penn Virginia’s Board of Directors may be contractually obligated to support this value-destroying transaction but you don’t have to. You are
free to vote in your clear economic best interests. We strongly urge you to join us in voting against the proposed merger today.
2 As disclosed in Note 6 to Denbury’s 2018 Consolidated Financial
Statements (see Denbury’s 2018 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2019 at pages 80-81).
This amount excludes $250 million in future interest payments that are deemed debt under GAAP rules for troubled debt restructurings.
3 See supra, footnote 1.
4 See supra, footnote 1.
PROTECT YOUR INVESTMENT IN PENN VIRGINIA AND VOTE “NO” ON THE PROPOSED POORLY CONCEIVED TRANSACTION WITH DENBURY.
WE URGE YOU TO VOTE AGAINST
THE TRANSACTION PROPOSALS BY SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD TODAY.
IF YOU HAVE ALREADY VOTED FOR THE DENBURY MERGER PROPOSAL ON PENN VIRGINIA’S WHITE PROXY CARD, VOTING AGAINST ON A LATER DATED PROXY CARD WILL CANCEL YOUR PREVIOUSLY CAST VOTE.
Thank you for your support.
If you have any questions or need assistance voting your shares AGAINST the Denbury merger proposal, please call Saratoga
Proxy Consulting LLC at (212) 257-1311 or (888) 368-0379 or email at firstname.lastname@example.org.
Mangrove Partners is a value-oriented investment manager founded in 2010. Mangrove’s investment objective is to organically compound net
worth while minimizing the chances of a permanent loss of capital.
Saratoga Proxy Consulting LLC
John Ferguson (212) 257-1311