Robbins LLP: Acquisition of Regency Energy Partners LP (RGP) by Energy Transfer Partners LP (ETP) May Not Be in Shareholders’ Best Interests
Robbins LLP is investigating the proposed acquisition of Regency Energy Partners LP (NYSE: RGP) by Energy Transfer Partners LP (NYSE: ETP). On January 26, 2015, the two companies announced the signing of a definitive merger agreement pursuant to which Energy Transfer Partners will acquire Regency Energy Partners. Under the terms of the agreement, Regency Energy Partners unit holders will receive 0.4066 of an Energy Transfer Partner unit and a cash payment of $0.32, valuing $26.89 for each share of Regency Energy Partners common stock.
Is the Proposed Acquisition Best for Regency Energy Partners and Its Unit Holders?
Robbins LLP’s investigation focuses on whether the board of directors at Regency Energy Partners is undertaking a fair process to obtain maximum value and adequately compensate its shareholders.
As an initial matter, the $26.89 merger consideration represents a one-month premium of only 13.2% based on Regency Energy Partners’ closing price on December 24, 2014. This premium is significantly below the average one month premium of nearly 37.8% for comparable transactions within the past five years. Further, the $26.89 merger consideration is significantly below the target price of $34.00 set by analysts at RBC Capital Markets on December 2, 2014, Barclays on November 7, 2014, and UBS on July 14, 2014; the target price of $33.00 set by an analyst at Robert W. Baird & Co. on August 21, 2014; and the target price of $27.00 set by an analyst at Credit Suisse on January 21, 2015.
On November 5, 2014, Regency Energy Partners released its earnings results for its third quarter 2014, reporting strong quarterly earnings. In particular, the company reported net income for the third quarter fiscal 2014 of $103 million, compared with $39 million for the comparable quarter in fiscal 2013. Regency Energy Partners also reported that the company’s adjusted EBITA increased 100% to $344 million, compared to $172 million for the third quarter in fiscal 2013. In addition, the company beat analyst expectations of sales for four out of the last six quarters. In commenting on third quarter results, Regency Energy Partners’ President and Chief Executive Officer Mike Bradley remarked, “Regency’s legacy assets experienced strong growth in the third quarter driven by continued ramp up in volumes in the gathering and processing and NGL logistics businesses, and a further increase in revenue generating horsepower. ”
In light of these facts, Robbins LLP is examining Regency Energy Partners board of directors’ decision to sell the company now rather than allow unit holders to continue to participate in the company’s continued success and future growth prospects.
Regency Energy Partners unit holders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information.
Regency Energy Partners unit holders interested in information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.