UPDATE 2-Linn Energy to pay $600 mln more for Berry Petroleum

Mon Nov 4, 2013 9:41am EST

* Berry shareholders to now get 1.68 LinnCo shares, up from 1.25

* Deal valued at $4.9 bln, including debt

* Berry shares up about 11 pct

Nov 4 (Reuters) - U.S. oil and gas producer Linn Energy LLC raised its purchase price for Berry Petroleum Co by $600 million to $4.9 billion, the companies said.

The higher price follows a drop in the share price of LinnCo LLC, a holding company set up by Linn for acquisitions.

Under the new agreement, Berry shareholders will receive 1.68 LinnCo shares for each Berry share they hold. This is higher than the original offer of 1.25 shares.

At LinnCo's Friday close of $33.21, the offer implies $55.79 for each Berry share. The revised offer price represents a 14 percent premium to Berry's Friday close of $48.75.

Berry shares rose 11 percent to $54, while Linn shares were up 2.4 percent in early trading on Monday.

"Berry's management had continued to support the merger, but it was certainly cognizant of the fact that current LinnCo trading levels did not provide sufficient valuation for Berry under the old deal terms," Wells Fargo Securities analysts wrote in a note to clients.

Shares of LinnCo, which only owns Linn units and has no assets or operations, dropped 10 percent through Friday close since the deal was announced on Feb. 21.

Berry shares rose 26 percent during the same period.

The Securities and Exchange Commission began an inquiry in July related to the deal as well as Linn and LinnCo's hedging strategies and certain other financial measures.

The boards of the three companies have approved the deal, but it remains subject to shareholder approvals.

The deal is the first acquisition of a corporation by an oil and gas producer structured as a master limited partnership or a limited liability company.

Berry will be converted into a limited liability company, allowing Linn to own Berry's assets in a pass-through entity without any immediate payment of tax.

Analysts said enhanced prospects for the Berry's Wolfcamp acreage in the Permian Basin in Texas could also be a reason for the increased purchase price.

Berry increased production from its Permian assets by 22 percent in the third quarter.

Linn has said that acquiring Berry will help it raise its output by a third and boost its oil reserves.