OKLAHOMA CITY (OBV) – Oklahoma City-based Chesapeake Energy Corporation and Southwestern Energy agreed to a merger, a multibillion-dollar deal that is expected to make the combined company the largest natural gas provider in the United States.
The companies announced the merger on Thursday, saying that the combined company will assume a new name once the deal closes.
The combined company is projected to have an enterprise value of approximately $24 billion. The all-stock transaction is valued at $7.4 billion, which amounts to $6.69 per share and is based on Chesapeake’s closing price on Jan. 10.
The merger will enable the combined company to “deliver affordable, lower carbon energy to meet growing domestic and international demand with significant, sustainable cash returns to shareholders through cycles,” a Chesapeake news release states.
“This powerful combination redefines the natural gas producer, forming the first U.S. based independent that can truly compete on an international scale. The union creates a deep inventory of advantaged assets adjacent to high demand markets, allowing for the application of proven operational practices and the power of an Investment Grade quality balance sheet to drive significant synergies benefiting energy consumers and shareholders alike,” said Nick Dell’Osso, Chesapeake’s President and Chief Executive Officer. “The world is short energy and demand for our products is growing, both in the U.S. and overseas. We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fueling a more affordable, reliable, and lower carbon future. I look forward to leading the talented workforce of the combined organization to accelerate the long-term value opportunity for our shareholders, employees, and all stakeholders.”
The combined company’s headquarters will be in Oklahoma City, but will maintain a presence in Houston, Texas, the location of Southwestern Energy’s headquarters.
Chesapeake Energy, a top U.S. oil and gas company, was founded in 1989 and works to produce “affordable, reliable, lower carbon energy.” The company aims to achieve net zero greenhouse gas emissions by 2035.
Southwestern Energy (SWN) was founded in 1929 and has been one of the largest natural gas and natural gas liquids producers in the nation. Its primary focus is production and development of natural gas, natural gas liquids and crude oil.
The merger creates future growth opportunities, according to Southwestern President and Chief Executive Officer Bill Way.
“I want to thank the entire Southwestern team for positioning the company to be part of this transformational combination. Together, Southwestern and Chesapeake can drive improved margins and returns from our highly complementary portfolios through enhanced scale, capital allocation flexibility, and access to premium markets to supply growing global natural gas demand. Most importantly, both sets of shareholders are able to participate in the substantial value creation and future growth opportunities of the combined company, with one of the top shareholder return frameworks in the sector.”
Each company’s board of directors approved the merger, which must be approved by Chesapeake and Southwestern shareholders and pass regulatory clearances. The merger is expected to close in the second quarter of this year.
Chesapeake shareholders will own approximately 60 percent of the combined company, and Southwestern shareholders will own the other 40 percent.
Southwestern shareholders will receive .0867 shares of Chesapeake common stock for each share of Southwestern common stock outstanding at closing, under the agreement’s terms.
Mike Wichterich, who is chairman of the Chesapeake Board of Directors, will serve as the combined company’s non-executive chairman, and Dell’Osso will continue his role as president and chief executive officer.
The combined company’s board of directors will have 11 members, comprised of seven Chesapeake representatives and four Southwestern representatives.
