ORLEN Upstream to acquire FX Energy

FX Energy Inc. (NASDAQ: FXEN, FXENP) has entered into a definitive merger agreement pursuant to which ORLEN Upstream will acquire all of the outstanding shares of common stock of FX Energy. ORLEN Upstream is the wholly owned exploration and production subsidiary of PKN ORLEN SA (GPW: PKN).

In the transaction, holders of FX Energy common stock will receive consideration of $1.15 per share in cash, which represents a 22% premium over the average closing price for FX’s common stock for the 60-trading-day period ended on Oct. 12. The transaction values FX Energy at approximately $119 million, including the company's net debt at June 30.

The agreement with ORLEN Upstream is the result of FX Energy's previously announced process to explore a possible sale of the company or other transaction and has been approved unanimously by the FX’s board of directors.

Under the terms of the merger agreement, ORLEN Upstream will commence a cash tender offer to purchase all of FX Energy's outstanding common stock, with a merger following the completion of the tender offer that would result in all shares of common stock not tendered in the tender offer being converted into the right to receive the cash consideration. FX Energy believes the two-step transaction will allow its common stockholders who tender their shares in the tender offer to receive the consideration more quickly than they would under a single-step merger transaction. Common stockholders who do not tender their shares in the tender offer will be entitled to receive the cash consideration upon consummation of the second-step merger.

Following completion of the tender offer, if ORLEN Upstream owns at least 90% of the outstanding shares of FX Energy common stock, including through the exercise of a "top-up" option granted to ORLEN Upstream, the merger will be effected through a "short-form" merger without further action by stockholders of FX Energy. FX Energy has granted to ORLEN Upstream a "top-up" option to acquire directly from FX Energy after completion of the tender offer the number of shares of common stock required to effect the "short-form" merger, subject to the availability of sufficient authorized and unissued shares of FX Energy common stock. If, after the completion of the tender offer and any exercise of the "top-up" option, ORLEN Upstream owns less than 90% of the outstanding shares of FX Energy common stock, FX Energy will convene a meeting of the holders of its common stock to approve the merger. ORLEN Upstream has agreed that it will vote all shares of FX Energy common stock then owned by it in favor of approval of the merger.

The tender offer is expected to begin by Oct. 27, and the transaction is expected to be completed in the fourth quarter of 2015 if effected as a "short-form" merger or in the first quarter of 2016 if a meeting of FX Energy's common stockholders is required to approve the merger. The closing of the transaction is subject to customary closing conditions, including at least a majority of the outstanding shares of FX Energy common stock being tendered in the tender offer and receipt of required antitrust approvals.

The merger agreement provides that all outstanding shares of FX Energy's 9.25% Series B cumulative convertible preferred stock will be redeemed in connection with the transaction pursuant to the terms of the preferred stock at the redemption price of $25.00 per share, plus accrued and unpaid dividends to, but not including, the redemption date.

Evercore Group LLC acted as financial advisor to FX Energy. Bracewell & Giuliani LLP and Kruse Landa Maycock & Ricks LLC acted as legal counsel for FX Energy. 

FX Energy is an independent oil and gas exploration and production company with production in the US and Poland. The company's main exploration and production activity is focused on Poland's Permian Basin, where the gas-bearing Rotliegend sandstone is a direct analog to the Southern Gas Basin offshore England.

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