Atlas Energy Resources Merger with Atlas America Seems a Good Move

The following press release announces the merger of Atlas Energy Resources (ATN) into Atlas America Inc (ATLS). The new company will be known as Atlas Energy. This merger raises some interesting possibilities and questions. The questions are more of a organizational nature:

• Will the merged company be listed on the NASDAQ or NYSE?
• What happens to the LLC structure and distribution policy of ATN?

The release states that Atlas Energy Resources shareholders will get 1.16 shares of the new Atlas Energy for each share owned. Also, that ATN distributions will be suspended until the merger goes through. ATN historically has paid a distribution right about now so I guess we can kiss that one goodbye.

Overall, I think this is a good move for ATN shareholders. Atlas America is the owner of the ATN general partner and the GP in these types of businesses siphon off a significant chunk of cash flow of MLP type businesses. ATLS also owns significant stakes in Atlas Pipeline Holdings (AHD) and Atlas Pipeline Partners (APL). I think these holdings are currently very undervalued by the market and now ATN shareholders will have exposure to, hopefully, the realization of those values.

The managements of the various Atlas companies have been saying they want to find ways to realize share holder value. This merger seems to me to be a very good step.

Note: I own a personal position in ATN.

Comments

[JohnnyHeck:]

So much of Mr. Cohen's (Atlas et al) companies have lost tremendous value through his poor or criminal hedging practices that I don't know whether this is another Enron or not. He has repeatedly stated that his hedges are not for specualtion, yet he repeatedly cancels them to generate cash and then reopens them at less favorable terms to continue reporting them on a non cash flow basis. I can't figure out whether or not there is any value being created through operations.

Apr 28 10:10 AM

[munny:]

ATN unitholders could have realized the value of Marcellus without being forced to adding the weight of APL/AHD to their ATN investment as a result of the merger.

Now, instead of distribution of cash, they have to hope that the Cohens can deliver price appreciation instead of cash.

Apr 28 10:42 AM

[secmaven:]

You can count on one thing. The Cohens will look out for themselves.

Apr 28 05:57 PM

[biomedlives:]

I agree with Munny, and I would have preferred to see ATN remain separate from the other Atlas companies.

Apr 28 09:54 PM

[User 316766:]

Can't people understand what they read? ATN will be a subsidiary of ATLS. The dividend is suspended only until the merger is completed. ATN will remain an LLC, distributions will continue post-merger. Cash is not being used from ATN to finance ATLS operations. Plus, ATN unit holders receive 1.16 shs of ATLS for every share of ATN the hold. So no one should panic, but instead brush up on their financial reasoning skills. To sell out of a position in ATN right now might seem smart, but consider that on 4/27 the merger was announced approximately 1:30pm and ATN rose $2 by market close (that's 2 1/2 hours). It's gone up both Tuesday and Wednesday (today). Why sell? Because one does not have financial literacy, and perhaps should not be in the market to begin with. On the other side of this deal, folks may be sorry they sold!

Apr 29 11:01 AM

[Oldtimer:]

PITTSBURGH--(BUSINESS WIRE)--Apr. 27, 2009-- Atlas America, Inc. (NASDAQ: ATLS) (“Atlas America”) and Atlas Energy Resources, LLC (NYSE: ATN) (“Atlas Energy”) today jointly announced that they executed a definitive merger agreement, pursuant to which a newly formed subsidiary of Atlas America will merge with and into Atlas Energy, with Atlas Energy surviving as a wholly owned subsidiary of Atlas America. In the merger, each Class B common unit of Atlas Energy not currently held by Atlas America will be converted into 1.16 shares of Atlas America common stock, and Atlas America will be renamed “Atlas Energy, Inc.” The Atlas America board of directors has approved the merger agreement and has resolved to recommend that the Atlas America stockholders vote in favor of the transactions contemplated by the merger agreement. The Atlas Energy board of directors and a special committee of Atlas Energy directors comprised entirely of independent directors have also approved the merger agreement and have resolved to recommend that the Atlas Energy stockholders vote in favor of the merger.

“As one of the leading producers in the Marcellus Shale with control of over 550,000 acres in its fairway, it is imperative that we redirect our Company’s cash flow to fully realize the potential value of these assets for our existing unitholders,” stated Richard D. Weber, President of Atlas Energy. “We believe that, by merging with Atlas America, we will create a new entity that will have the financial resources to accelerate and expand the development of our Marcellus Shale assets where we have already identified 4 to 6 trillion cubic feet of additional reserves.”

Edward E. Cohen, Chairman and Chief Executive Officer of Atlas America, said that “the merger transaction should significantly enhance the value of the combined enterprise for investors in both Atlas America and Atlas Energy. The merger will allow the combined companies to sharply accelerate expansion and development of its Marcellus Shale position by reinvesting a far greater portion of its combined cash flow in America’s greatest natural gas play. And the other benefits are enormous.”

The merger is expected to simplify the organizational structure of the Atlas companies and create a more attractive investment opportunity with a larger public float. In addition, the merger is expected to enhance value to Atlas Energy by eliminating the effects on the public stockholders of the block represented by Atlas America’s approximate 48% common unit ownership and management incentive interests in Atlas Energy";

The above is a direct quote from the ATN website. ATN unitholders will cease to exist as will the dividend. Each share of ATN will be converted to 1.16 shares of the new company which will be named Atlas Energy. I hope you don't really believe Atlas America will resume paying the dividend when they clearly stated they need the money to "invest" in further development. What better way to get these funds than screwing the unitholders.

316766 should do a little reviewing himself.




On Apr 29 11:01 AM User 316766 wrote:

> Can't people understand what they read? ATN will be a subsidiary
> of ATLS. The dividend is suspended only until the merger is completed.
> ATN will remain an LLC, distributions will continue post-merger.
> Cash is not being used from ATN to finance ATLS operations. Plus,
> ATN unit holders receive 1.16 shs of ATLS for every share of ATN
> the hold. So no one should panic, but instead brush up on their financial
> reasoning skills. To sell out of a position in ATN right now might
> seem smart, but consider that on 4/27 the merger was announced approximately
> 1:30pm and ATN rose $2 by market close (that's 2 1/2 hours). It's
> gone up both Tuesday and Wednesday (today). Why sell? Because one
> does not have financial literacy, and perhaps should not be in the
> market to begin with. On the other side of this deal, folks may be
> sorry they sold!

Apr 30 10:54 AM