Oil and gas producer Crescent Energy has agreed to buy rival SilverBow Resources for $2.1 billion, a deal which would create the second-largest operator in the Eagle Ford basin in south Texas.
The agreement comes as SilverBow has faced a challenge from its largest shareholder, Kimmeridge Energy Management, which had sought to buy the company and was aiming to unseat three current directors and install its own nominees at SilverBow’s upcoming annual shareholder meeting.
For Crescent, the deal would expand its position in the Eagle Ford, which is close to export facilities along the Gulf Coast. The tie-up follows an industry-wide consolidation trend to build economies of scale and hydrocarbon reserves, including Chevron offering to buy Hess and Exxon acquiring Pioneer Natural Resources.
“We feel really good about the position in the Eagle Ford, and we would love to continue to get better and bigger,” a Crescent executive said on a call with analysts.
Under the terms of the deal, SilverBow shareholders would get 3.125 shares of Crescent Class A common stock for each share held, along with an option to get all or part of the proceeds in cash at a value of $38 per share. The maximum value of the deal’s cash component was $400 million, the companies said.
Shares in SilverBow closed 13.2% higher, giving it a market capitalization around $935 million. Crescent’s stock fell 5%.
SilverBow was set to learn whether shareholders would back Kimmeridge’s board challenge at its annual meeting on May 21. The meeting will now take place May 29.
Earlier this year, SilverBow had rejected a buyout offer from Kimmeridge that valued it at $34 per share. The deal would have merged SilverBow with Kimmeridge’s own south Texas operations to create a natural-gas focused producer, at an approximate 7% share price premium.
Sources close to SilverBow said Crescent’s offer, which emerged over recent months, promised a higher per-share premium than Kimmeridge and also created a combined company with more oil-weighted production.
Kimmeridge said in a statement it was studying the Crescent offer and looked forward to learning more from management.
The deal premium of 17% is a bit higher than recent upstream transactions, said Andrew Dittmar, principal analyst at Enverus Intelligence, adding it would be challenging for Kimmeridge to make a more attractive counterproposal.
The Crescent offer would result in Crescent shareholders owning between 69% and 79% of the combined company, depending on the ultimate cash component. Both sets of shareholders must vote to approve the transaction, which aims to close by the end of the third quarter.
Source: Reuters.com