USA - Contango Oil & Gas to merge with KKR's Independence Energy business
Contango Oil & Gas Co ( NYSEAMERICAN: MCF ) said on Tuesday it will merge with KKR & Co’s Independence Energy LLC. The all-stock deal will establish a new $5.7 billion or £4.03 billion (enterprise value) oil and gas firm.
Independence shareholders will own 76% of the combined company
As per the terms of the agreement, Independence stockholders will own roughly 76% of the new company, while the remaining will go to Contango shareholders. The deal is likely to close in late Q3 or early Q4.
In 2022, the combined company is likely to report up to $800 million of adjusted core earnings on per-day production of 108,000 to 114,000 barrels of oil equivalent. Based on the per-share price at which Contango closed the regular session on Monday, the new company will enjoy an initial equity market capitalisation of close to $4.8 billion.
The oil and gas prices took an unprecedented hit last year due to the Coronavirus pandemic. The demand, however, picked up again in 2021 on the back of vaccine rollouts, leading to several companies in this sector announcing mergers and acquisitions in recent months.
David Rockecharlie will be the CEO of the new company
The current head of KKR Energy Real Assets, David Rockecharlie, will be the CEO of the joint company. John Goff (chairman and largest shareholder of Contango), on the other hand, will serve as the chairman of the new Houston-headquartered firm. Commenting on the merger, Goff said:
“This is a very compelling merger for Contango shareholders providing substantial value accretion, significant scale and lower cost of capital. KKR’s desire to position the combined company to be their long-term primary platform to focus on continued consolidation in the industry is a testament to what the team has created at Contango. I look forward to working with David Rockecharlie and the KKR team in continuing our strategy of consolidation and industry-leading performance.”
The combined company will also assume a new name and list its shares on the New York Stock Exchange under a new ticker symbol. The agreement also gives authority to KKR to appoint all board members. On matters including officer changes, debt incurrence, divestitures, and mergers and acquisitions, it will also practice some consent rights.
Contango shares opened more than 20% up on Tuesday but lost most of the intraday gain in the next hour. At the time of writing, the Texas-based oil and gas company is valued at $1.18 billion.
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