Linn Energy LLC (NASDAQ: LINE) and its subsidiary LinnCo LLC (NASDAQ: LNCO) announced this morning that the two companies have signed a definitive merger agreement with Berry Petroleum Co. (NYSE: BRY) under which the two firms will pay $2.5 billion in stock for the exploration and production company and assume $1.8 billion in Berry debt. The acquisition is expected to be tax-free to Berry shareholders and should be completed by the end of June.

The Linn companies expect the acquisition to add $0.40 a share to distributable cash flow in the first full year following the close of the transaction. Linn Energy’s management intends to recommend to its board that the company’s dividend be increased from $2.90 to $3.08 annually, and the LinnCo distribution is expected to increase by $0.02 a share in the March quarter, rising to an annual rate of $2.90. LinnCo also expects to increase its distribution to $3.08.

Berry shareholders will receive 1.25 shares of LinnCo in exchange for each share of Berry stock they hold, valuing the shares at about $46.24, a premium of about 20% to last night’s closing price for Berry shares.

Shares of Berry are trading up 21.6% in the premarket this morning, at $46.95 in a 52-week range of $30.21 to $57.26. Shares of Linn Energy are up 3.9%, at $38.09 in a 52-week range of $34.27 to $42.57. LinnCo shares are up 5.2%, at $38.92 in a post-IPO range of $35.15 to $40.40.

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