Business Context and Reporting Period
This Form 8-K, filed on May 5, 2019, by Midstates Petroleum Company, Inc. (Midstates), announces the entry into a definitive Merger Agreement with Amplify Energy Corp. (Amplify). Under the agreement, Amplify will merge with a wholly-owned subsidiary of Midstates, with Amplify surviving as a subsidiary of Midstates. The transaction is structured as a tax-free reorganization.
Key Financial Metrics and Transaction Terms
The filing does not provide historical revenue, profit, cash flow, or debt metrics for either company. The primary financial terms of the transaction are as follows:
- Exchange Ratio: Each outstanding share of Amplify common stock will be converted into the right to receive 0.933 shares of Midstates common stock.
- Ownership Structure: Following the closing, current Amplify and Midstates stockholders will each own approximately 50% of the combined company.
- Termination Fees: A termination fee of $4,500,000 is payable by Amplify to Midstates under specific conditions (e.g., failure to close and entering an alternative proposal). A reciprocal fee is payable by Midstates to Amplify under similar conditions.
- Equity Compensation: The transaction is treated as a "change in control," triggering full vesting of stock options, RSUs, and PSUs for terminated employees and directors.
Material Changes and Governance
The filing details significant changes to corporate governance and leadership contingent on the merger's closing:
- Board Composition: The combined company's board will consist of eight members: David M. Dunn, Christopher W. Hamm, Scott L. Hoffman, Randal T. Klein, Evan S. Lederman, Kenneth Mariani (CEO), David H. Proman, and Todd R. Snyder.
- Executive Departures: Prior to the effective time, five current Midstates directors (David J. Sambrooks, Alan J. Carr, Patrice D. Douglas, Neal P. Goldman, and David H. Proman) will resign. Additionally, CEO David J. Sambrooks and three other officers will be deemed terminated without cause.
- Stockholder Support: Midstates has entered into voting and support agreements with major Amplify stockholders (Fir Tree, Brigade, Axys, and Cross Sound) to vote in favor of the merger.
Guidance, Outlook, and Risks
The filing contains no financial guidance or operational outlook for the combined entity. Key risks and contingencies include:
- Closing Conditions: The merger is subject to stockholder approval from both companies, SEC effectiveness of a Form S-4 registration statement, expiration of the HSR Act waiting period, and NYSE listing approval.
- Outside Date: The agreement must be consummated on or before November 5, 2019, or it may be terminated.
- Forward-Looking Statements: The document includes standard disclaimers that actual results may differ materially from expectations regarding the completion and timing of the merger.
- Meeting Postponement: Midstates has postponed its 2019 Annual Meeting of Stockholders, originally scheduled for June 4, 2019, due to the pending transaction.
Investor Verification Checklist
- Verify the final approval status of the merger by both Midstates and Amplify stockholders.
- Review the definitive joint proxy statement/prospectus (Form S-4) for detailed financial data and risk factors not included in this 8-K.
- Confirm the status of regulatory approvals, specifically the Hart-Scott-Rodino (HSR) waiting period and NYSE listing authorization.
- Monitor the timeline for the rescheduled Midstates Annual Meeting of Stockholders.
- Assess the impact of the executive departures and board restructuring on the combined company's strategic direction.