8-K: Berry Corp to Merge with California Resources in All-Stock Deal

Sentiment:

Merger Agreement Announcement 16 September 2025 6:05 AM

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

Delay expectedThe merger has an initial outside date of March 14, 2026, which can be extended by three months up to two times if regulatory approvals (HSR Act and FERC Approval) are the only outstanding conditions to closing.

Summary

Berry Corporation (bry) will merge with California Resources Corporation (Parent) through Parent's wholly-owned subsidiary, Dornoch Merger Sub, LLC.
Each outstanding share of Berry Corp common stock will be converted into 0.0718 shares of Parent Common Stock, with cash paid in lieu of fractional shares.
Berry Corp will survive the merger as a direct, wholly-owned subsidiary of California Resources Corporation.
The Berry Corp Board of Directors unanimously approved the merger, deeming it advisable, fair, and in the best interests of the company and its stockholders, and recommends stockholder approval.
Certain Berry Corp restricted stock units (RSUs) and performance-based restricted stock units (PSUs) will accelerate and be cashed out, while others will convert into Parent RSUs with adjusted share counts and continued terms.
The merger is subject to customary closing conditions, including Berry Corp stockholder approval, NYSE listing for Parent shares, HSR Act and FERC regulatory approvals, and the effectiveness of the Form S-4 registration statement.
Berry Corp has entered into retention agreements with named executive officers, including Mr. Araujo ($100,000), Ms. Hunter ($950,000), Mr. Magids ($360,000), and Mr. Helm ($360,000), payable at the effective time of the merger.
The transaction is intended to qualify as a reorganization for U.S. federal income tax purposes under Section 368(a) of the Internal Revenue Code.

Sentiment

Score: 7

Explanation: The sentiment is positive due to a definitive merger agreement being reached, indicating a clear strategic path forward for Berry Corp shareholders. The unanimous board approval and the intention for a tax-free reorganization are favorable. However, the all-stock nature and inherent risks of integration and regulatory hurdles temper the score from being higher.

Positives

Berry Corp shareholders will receive shares of California Resources Corporation, potentially offering exposure to a larger, more diversified entity.
The Berry Corp Board unanimously determined the merger is advisable, fair, and in the best interests of the company and its stockholders.
Retention agreements are in place for key executives, ensuring an orderly transition and continuity.
The transaction is structured to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Negatives

Berry Corp will cease to be an independent publicly traded company, and its common stock will no longer be outstanding.
The merger consideration is entirely stock-based, exposing Berry Corp shareholders to the future performance of California Resources Corporation's stock.
Potential for transaction costs and unknown liabilities.
Risks related to the integration of the businesses and achieving projected synergies.
The possibility of regulatory conditions being imposed that could constitute a 'Burdensome Condition' for Parent, potentially impacting the combined entity.

Risks

Transaction costs and unknown liabilities associated with the merger.
Adverse effects on the market price of Berry Corp's or Parent's common stock due to announcements related to the proposed transaction.
Challenges in successfully integrating the businesses of Berry Corp and Parent.
Difficulty or longer-than-expected time to achieve projected synergies from the merger.
Risks related to financial community and rating agency perceptions of each of the Company and Parent or its respective business, operations, financial condition and the industry in which it operates.
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.
The risk that Berry Corp 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 of Berry Corp and Parent to retain customers, key personnel, and maintain relationships with suppliers and customers.
Risks that any closing conditions, including necessary regulatory approvals, may not be satisfied in a timely manner or may be obtained subject to unanticipated conditions.
Risks related to the application of any applicable California state law following the date of the agreement, or any proceeding to enforce such application (Specified Effects).

Future Outlook

The filing outlines the intent for Berry Corporation to merge with California Resources Corporation, with Berry becoming a wholly-owned subsidiary. The transaction is subject to various closing conditions, including regulatory and stockholder approvals, and is intended to qualify as a tax-free reorganization. The combined entity anticipates potential synergies and integration efforts, while also acknowledging inherent risks associated with such a transaction.

Management Comments

The board of directors of the Company (the Company Board) has unanimously (a) determined that the transactions contemplated by the Merger Agreement, including the Merger (the Transactions) 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 and (b) directed that the Merger Agreement be submitted to the holders of shares of Company Common Stock for their adoption.

Industry Context

This merger represents a consolidation within the oil and gas exploration and production industry, specifically in California, given California Resources Corporation's focus. Such transactions are common strategies for companies to achieve economies of scale, enhance operational efficiencies, and potentially optimize asset portfolios in a dynamic energy market. The mention of 'Specified Effects' related to California state law suggests a unique regulatory environment that could influence such mergers.

Comparison to Industry Standards

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Named Executive Officer	Mr. Araujo	Same	Effective Time of Merger	Retention agreement for continued employment through the merger, with a retention payment of $100,000.
Named Executive Officer	Ms. Hunter	Same	Effective Time of Merger	Retention agreement for continued employment through the merger, with a retention payment of $950,000.
Named Executive Officer	Mr. Magids	Same	Effective Time of Merger	Retention agreement for continued employment through the merger, with a retention payment of $360,000.
Named Executive Officer	Mr. Helm	Same	Effective Time of Merger	Retention agreement for continued employment through the merger, with a retention payment of $360,000.
Directors of Surviving Corporation	Berry Corp Board	Merger Sub Board	Effective Time of Merger	Merger Sub Board will become the directors of the Surviving Corporation as part of the merger structure.
Officers of Surviving Corporation	Berry Corp Officers	Merger Sub Officers	Effective Time of Merger	Merger Sub Officers will become the officers of the Surviving Corporation as part of the merger structure.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Bylaws Amendment	At the Effective Time, the bylaws of Berry Corp will be amended and restated to a form mutually agreed upon by the parties.	Effective Time of Merger	Standard procedure for a merger, aligning governance with the new parent company's structure and policies.
Certificate of Incorporation Amendment	At the Effective Time, the certificate of incorporation of Berry Corp will be amended and restated to be in the form set forth in Exhibit A, authorizing 1,000 shares of common stock, par value $0.01 per share, with exclusive voting rights for directors and other purposes.	Effective Time of Merger	Reflects Berry Corp becoming a wholly-owned subsidiary with a simplified capital structure under the parent company, reducing public shareholder governance rights.
Director Liability Limitation	The amended certificate of incorporation includes provisions limiting director liability to the fullest extent permitted by Delaware law, with specific exceptions for breaches of loyalty, bad faith acts, intentional misconduct, knowing law violations, Section 174 of DGCL, or improper personal benefit.	Effective Time of Merger	Provides standard protections for directors, consistent with Delaware corporate law, which is a common practice for public and private companies.
Director and Officer Indemnification	The amended certificate of incorporation provides for indemnification and advancement of expenses to directors and officers to the fullest extent permitted by DGCL, with the Surviving Corporation being the indemnitor of first resort.	Effective Time of Merger	Ensures continued protection for past and present directors and officers, which is crucial for attracting and retaining talent and mitigating personal risk.

Legal Proceedings

Any stockholder litigation related to the Agreement or Transactions ('Transaction Litigation') will be promptly notified to the other party, with reasonable opportunity to participate in defense or settlement.

Related Party Transactions

Since December 31, 2022, no contracts, transactions, arrangements, or understandings between the Company or its Subsidiaries and any other Person are in existence that were not, but were required to be, disclosed under Item 404 of Regulation S-K of the Securities Act (except for normal salaries, bonuses, and expense reimbursements in the Ordinary Course).

Stakeholder Impact

Shareholders (Berry Corp): Will receive shares of California Resources Corporation, becoming shareholders of the combined entity. The transaction is intended to be a tax-free reorganization.
Employees (Berry Corp): Key executives have retention agreements. Other employees will receive substantially similar compensation and benefits for 12 months post-merger. Parent will use commercially reasonable efforts to waive pre-existing conditions, credit deductibles, and provide service credit for benefit plans.
Customers/Suppliers: The companies will use commercially reasonable efforts to preserve existing relationships.
Creditors: Indebtedness under Berry Corp's credit agreements will be satisfied and related Encumbrances released at closing.

Next Steps

Berry Corp to convene a stockholder meeting to obtain the Requisite Company Vote.
Parent to prepare and file a Registration Statement on Form S-4 with the SEC.
Both parties to seek HSR Act and FERC regulatory approvals.
Parent to cause its shares to be approved for listing on the NYSE.
Berry Corp to cooperate with delisting its shares from NASDAQ and deregistering under the Exchange Act as promptly as practicable after the Effective Time.
Berry Corp to potentially terminate its 401(k) Plan if requested by Parent.
Integration planning and execution post-closing.

Key Dates

Date	Description
2022-12-31	Applicable Date for Company Reports and compliance checks.
2023-12-31	Applicable Date for Parent Reports and compliance checks.
2024-11-06	Date of Senior Secured Term Loan Credit Agreement.
2024-12-24	Date of Senior Secured Revolving Credit Agreement and First Amendment to Term Loan Credit Agreement.
2024-12-31	Date of Company Reserve Reports and fiscal year end for certain capital expenditure budgets.
2025-01-13	Date of Confidentiality Agreement between Company and Parent.
2025-03-03	Date of Parent's Annual Report on Form 10-K for fiscal year ended December 31, 2024.
2025-03-13	Date of Company's Annual Report on Form 10-K for fiscal year ended December 31, 2024.
2025-03-19	Date of Parent's definitive proxy statement for its 2025 Annual Meeting of Stockholders.
2025-04-07	Date of Company's definitive proxy statement for Parent's 2025 Annual Meeting of Stockholders.
2025-05-06	Date of Parent's Current Report on Form 8-K.
2025-05-22	Date of Company's Current Report on Form 8-K.
2025-06-23	Date of Parent's Current Report on Form 8-K.
2025-06-30	Date of Parent's Quarterly Report on Form 10-Q for three months ended June 30, 2025, and date for certain Oil and Gas Property valuations.
2025-08-05	Date Merger Sub was formed.
2025-09-10	Close of business date for Berry Corp capital structure and equity award listings.
2025-09-12	Close of business date for Parent capital structure listings.
2025-09-14	Date of Merger Agreement and earliest event reported.
2025-09-16	Date of signing of the 8-K report.
2026-03-14	Initial Outside Date for merger consummation, extendable by three months up to two times if regulatory approvals are the only outstanding condition.

Recommendation

hold

The filing announces a definitive merger agreement where Berry Corp shareholders will receive shares of California Resources Corporation. This is an all-stock transaction, meaning the value for Berry Corp shareholders is now directly linked to the future performance of California Resources Corporation's stock and the successful completion of the merger. Given the board's unanimous approval and the intention for a tax-free reorganization, the immediate action for existing Berry Corp shareholders is to hold their shares through the merger process. A 'hold' recommendation implies that investors should maintain their current position and assess the combined entity's prospects and their investment strategy for California Resources Corporation post-merger.

Keywords

Berry Corporation, California Resources Corporation, Merger, Acquisition, Oil and Gas, Energy, SEC Filing, 8-K, Stock-for-Stock, Corporate Action, Shareholder Vote, Regulatory Approval, BRY, Nasdaq

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