Unitholders Approve PVR-PVG Merger

Penn Virginia Resource Partners L.P. (PVR - Analyst Report) and its general partner, Penn Virginia GP Holdings L.P. (PVG), said that the majority of unitholders of both partnerships have approved their proposed merger. The proposal for the merger of Penn Virginia Resource Partners and Penn Virginia GP Holdings was put forward in September 2010.

The merger proposal, yesterday, cleared an important stage with about 21.3 million PVG units or 54% of the PVG units outstanding giving their approval for the merger.  The unitholders of Penn Virginia Resource Partners have already given their consent for the merger on February 16, 2011.

Management said that the support extended by the unitholders of both PVG and PVR confirms the importance of this merger transaction and positions them to take advantage of accretive market opportunities.

Presently, Penn Virginia GP Holdings holds a 37.6% stake in Penn Virginia Resource. The merger proposal calls for a 100% equity consideration, cancelling PVG’s incentive distribution rights and PVR’s limited partnership units owned by PVG. Following the merger, Penn Virginia Resource will own Penn Virginia GP, entirely.

The merger deal entitles every PVG limited partnership unitholder to receive 0.98 PVR common units. This will result in the issue of roughly 38.3 million new PVR limited partnership units and the cancellation of about 19.6 million PVR limited partnership units owned by PVG.

The partnerships expect the merger to close on March 10, 2011. The trading of PVG common units on the New York Stock Exchange will be discontinued before the market opens for business following the day on which the merger closes.  PVR common units will continue to be traded on the New York Stock Exchange under the ticker symbol "PVR".

The terms of the merger agreement were unanimously approved by the conflicts committee of both PVR and PVG’s general partners. The terms of the merger were also approved by all members of the boards of directors of PVR’s general partner and PVG’s general partner. Following the merger, the three independent directors of PVG’s general partner are expected to join the board of PVR’s general partner.

Management believes the merger will help lower PVR’s cost of capital and improve its competitive position as well as provide an opportunity to grow its distributable cash flows. The merger will also simplify PVR’s partnership structure, providing a capital and governance structure, which will be more easily understood by the investors.

Though management expects the additional PVR units issued to PVG unitholders to dilute PVR’s distributable cash flow per unit modestly in 2011, it expects the transaction to be accretive thereafter due to the elimination of incentive distributions currently being paid to PVG.

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