Forest Oil, Sabine To Amend Merger Agreement - Quick Facts

(RTTNews) - Forest Oil Corp. (FST) Thursday said it has agreed to amend its previously announced merger agreement with Sabine Oil & Gas LLC.

The revised transaction stipulates that, if approved by the Forest shareholders, the name of Forest will be changed to "Sabine Oil & Gas Corporation" and the ticker changed to "SABO."

The revised agreement does not alter the economic terms of the transaction and, just as under the original agreement, Forest shareholders will own around 26.5 percent of the economic interest in the combined businesses of Forest and Sabine.

The transaction structure has been revised so that the owners of Sabine Oil & Gas will contribute their interests in Sabine Oil & Gas to Forest in exchange for common and preferred stock in Forest. Consequently, Sabine Oil & Gas will be a wholly-owned unit of Forest, and Sabine Investor Entities (owners of Sabine Oil & Gas) will have an aggregate 73.5 percent economic interest in Forest, while existing Forest common shareholders will have an aggregate 26.5 percent economic interest in Forest.

The company said the 73.5/26.5 percent economic interest allocation remains unchanged.

Voting power, however, has been changed under the revised agreement to give 80 percent for Sabine Investor Entities in Forest and 20 percent for existing shareholders in Forest.

Under the original agreement, Sabine Investor Entities would have held 73.5 percent of the voting power in the combined company, while Forest public shareholders would have held 26.5 percent.

In addition, the number of directors on the board is being increased to 10, to ensure that the Sabine Investor Entities are able to nominate a number of directors proportionate to their 80 percent voting power,. The other two individuals nominated to serve on the Forest board will be selected by the nominating committee, but under the stockholder's agreement, the Sabine Investor Entities have agreed to vote in favor of the election of such nominees, Forest said in a statement.

The new transaction requires only majority approval, as opposed to two thirds of outstanding Forest common shares. In addition, unless waived by the parties, a vote of a majority of the outstanding Forest common shares approving the Charter Amendment will be required to complete the Transactions.

Under the original agreement, Forest shareholders would have received 0.1 shares of Holdco (Combination of Forest and Sabine under a newly formed public holding company) for each share of Forest common stock. The revised agreement entails Forest shareholders to retain their existing shares in Forest.

Forest has also adopted a shareholder rights plan, and today declared a dividend of one right on each outstanding share of Forest's common stock. Forest said the rights plan is intended to prevent persons from acquiring beneficial ownership of 5 percent or more of Forest's common stock or, for investors that own in excess of 5 percent today, from increasing their beneficial ownership, but will not apply to and will not affect any shareholder that does not have a "short"-equivalent position with respect to Forest's debt.