425: Berry Corp. to Merge with California Resources

Berry Corporation (bry) has entered into a definitive merger agreement with California Resources Corporation, becoming a wholly-owned subsidiary.

Summary

• Berry Corporation (bry) has entered into an Agreement and Plan of Merger with California Resources Corporation (Parent) and Dornoch Merger Sub, LLC (Merger Sub) on September 14, 2025.
• Merger Sub will merge with and into Berry Corporation, with Berry surviving as a direct, wholly-owned subsidiary of Parent.
• Each share of Berry common stock will be converted into 0.0718 shares of Parent common stock, with cash paid in lieu of fractional shares.
• Certain outstanding restricted stock units (Single Trigger Company RSUs) will vest in full and be converted into a cash payment equal to the number of shares multiplied by the Equity Award Cash-Out Price, plus unpaid dividend equivalents.
• Other restricted stock units (Company RSUs not Single Trigger) will convert into Parent restricted stock units (Parent RSUs), maintaining their original terms and conditions, with the number of Parent shares adjusted by the Exchange Ratio.
• Performance-based restricted stock units (Single Trigger Company PSUs) will vest in full based on target or the greater of target/actual performance and be converted into a cash payment.
• Other performance-based restricted stock units (Company PSUs not Single Trigger) will convert into Parent RSUs, with the number of Parent shares adjusted by the Exchange Ratio based on the greater of target/actual performance.
• Berry's Board of Directors unanimously determined the merger is advisable, fair, and in the best interests of the company and its stockholders, recommending approval.
• The merger is intended to qualify as a reorganization for U.S. federal income and applicable state and local tax purposes.
• Retention agreements were approved for named executive officers: Mr. Araujo ($100,000), Ms. Hunter ($950,000), Mr. Magids ($360,000), and Mr. Helm ($360,000), contingent on continued employment through the Closing and execution of a reaffirmation.
• The merger is subject to customary closing conditions, including Berry stockholder approval, NYSE listing for Parent shares, expiration/termination of the HSR Act waiting period, FERC approval, absence of prohibitive laws, and effectiveness of the Form S-4 registration statement.

Sentiment

Score: 8

Explanation: The unanimous board approval, the strategic nature of the merger, and the tax-free reorganization structure suggest a strong positive outlook for the transaction's completion and potential benefits, despite customary risks and the loss of independent public listing for Berry.

Positives

• Berry's Board of Directors unanimously determined that the merger is advisable, fair, and in the best interests of the Company and its stockholders.
• The transaction is intended to qualify as a reorganization for U.S. federal income and applicable state and local tax purposes, which can be beneficial for shareholders.
• Retention agreements for key executive officers (Mr. Araujo, Ms. Hunter, Mr. Magids, Mr. Helm) are in place to ensure an orderly transition of duties and incentivize continued performance through the merger.

Negatives

• Berry Corporation will cease to be an independent publicly traded entity, becoming a wholly-owned subsidiary of California Resources Corporation.
• Berry may be required to pay a termination fee of $12,044,370.00 to Parent under specified circumstances, such as a change of recommendation or entering into a superior proposal.
• Berry may be required to pay Parent's reasonable, documented, out-of-pocket fees, costs, and expenses up to $5,000,000.00 if the requisite company vote is not obtained.

Risks

• Transaction costs associated with the merger.
• Unknown liabilities that may arise from the transaction.
• Adverse effects on the market price of Berry's or Parent's common stock due to merger announcements.
• Inability to successfully integrate the businesses of Berry and Parent.
• Failure to achieve projected synergies or taking longer than expected to achieve them.
• Risks related to financial community and rating agency perceptions of either company or the combined entity.
• Potential impact of general economic, political, and market factors on either company or the proposed transaction.
• The occurrence of any event, change, or circumstance that could lead to the termination of the proposed transaction.
• Risk that Berry stockholders may not approve the proposed transaction.
• Disruption of management time from ongoing business operations due to the proposed transaction.
• Effects of the announcement, pendency, or completion of the proposed transaction on the ability to retain customers, key personnel, and maintain relationships with suppliers and customers.
• Risks that any of the closing conditions may not be satisfied in a timely manner, including necessary regulatory approvals or conditions imposed by regulators.
• The merger may not qualify for the intended tax-free reorganization treatment.
• Regulators may impose a 'Burdensome Condition' (e.g., divestitures, operational restrictions, or significant financial concessions) that would materially affect the business, operations, financial condition, or results of operations of the combined entity.

Future Outlook

The merger is intended to qualify as a reorganization for U.S. federal income and applicable state and local tax purposes. Parent will prepare and file a registration statement on Form S-8 to register the shares of Parent Common Stock necessary to fulfill its obligations under the equity award treatment. The combined entity aims to achieve projected synergies, though there is a risk it may take longer than expected to realize these benefits.

Management Comments

• The board of directors of the Company has unanimously determined that the transactions contemplated by the Merger Agreement, including the Merger, are advisable, fair to, and in the best interests of, the Company and its stockholders, approved and declared advisable the Merger Agreement and the Transactions and resolved to recommend the holders of shares of Company Common Stock approve the adoption of the Merger Agreement and approve the Transactions on the terms and subject to the conditions set forth in the Merger Agreement.

Industry Context

This merger represents a consolidation within the oil and gas exploration, development, and production industry. Such transactions are often driven by a desire for increased scale, operational efficiencies, and strategic positioning in a dynamic energy market. The mention of 'Qualifying Facilities' and 'Exempt Wholesale Generator' suggests that the combined entity may have interests or operations in the broader energy generation sector, potentially indicating a diversified energy strategy or specific regulatory considerations within the power industry.

Management Changes

Corporate Governance

Legal Proceedings

• The filing acknowledges the potential for 'Transaction Litigation' (stockholder litigation related to the Agreement or Transactions) and outlines procedures for prompt notification, participation in defense or settlement, and good faith consideration of advice from the other party. No specific material pending litigation is detailed.

Stakeholder Impact

• Shareholders: Berry stockholders will receive shares of California Resources Corporation common stock, effectively exchanging their ownership in Berry for ownership in the combined entity. The transaction is intended to be tax-free for U.S. federal income tax purposes.
• Employees: Continuing employees will receive comparable base salary/hourly wage, target annual cash incentive, and substantially similar total target annual compensation and benefits for 12 months post-merger. They will also receive service credit for vesting, benefit accrual, and eligibility in Parent's plans. Retention payments are provided to named executive officers.
• Management: The board of directors and officers of Merger Sub will become the board and officers of the Surviving Corporation. Key executives of Berry will receive retention payments to ensure an orderly transition.

Next Steps

• Berry Corporation will prepare and file a proxy statement (Proxy/Prospectus) with the SEC.
• California Resources Corporation will prepare and file a registration statement on Form S-4 (Registration Statement) with the SEC, which will include the Proxy/Prospectus.
• The SEC must declare the Registration Statement effective.
• The Proxy/Prospectus will be mailed to Berry stockholders.
• Berry stockholders will hold a meeting to approve the adoption of the Merger Agreement.
• The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 must expire or terminate.
• Required approvals under Section 203 of the U.S. Federal Power Act (FERC Approval) must be received.
• The shares of Parent Common Stock to be issued in the merger must be authorized for listing on the NYSE.
• Berry Corporation may terminate its 401(k) Plan, with Continuing Employees becoming eligible to participate in Parent's 401(k) plan and able to roll over eligible distributions.
• After the Effective Time, Berry Common Stock will be delisted from NASDAQ and deregistered under the Exchange Act.

Key Dates

Recommendation

The unanimous board approval and the structure as a tax-free reorganization are positive indicators for the transaction's completion. However, the stock-for-stock nature means Berry shareholders will become shareholders of California Resources Corporation, and their future returns will depend on the performance of the acquiring company. While the deal is expected to close, there are customary regulatory and shareholder approval conditions, as well as integration risks. A 'Hold' recommendation reflects the expectation of deal completion but acknowledges the shift in investment thesis from Berry to the combined entity, warranting further evaluation of California Resources Corporation.

Keywords

Merger, Acquisition, Oil and Gas, Energy, SEC Filing, BRY, California Resources Corporation, Stock-for-stock, Reorganization, Shareholder Vote, Regulatory Approval, Executive Compensation, Corporate Governance