LETTERONE & BASF MERGER
LETTERONE - LetterOne and BASF sign Letter of Intent to merge their oil and gas businesses
BASF and L1 Energy, the energy investment arm of LetterOne, announce their intention to merge their oil and gas subsidiaries
- Wintershall DEA to be one of the largest independent European exploration and production companies
- Wintershall DEA to be governed jointly by L1 Energy and BASF, with joint headquarters in Hamburg and Kassel
- IPO envisaged in the medium term
- Closing could be expected in the second half of 2018, subject to customary regulatory approvals, completion of due diligence process, and negotiation of definitive transaction agreements. There is no assurance that the intended transaction will be consummated.
LetterOne announced today it has signed a Letter of Intent with BASF to combine the parties' oil and gas businesses in a joint venture. The new merged entity would operate under the name Wintershall DEA.
By combining these activities, the companies strive to create a sound footing for sustainable long-term growth, optimize the portfolio of the combined business, and realize synergies. Wintershall DEA would have significant growth potential and be one of the largest independent European exploration and production companies. In the medium term, L1 Energy and BASF intend to list Wintershall DEA through an IPO.
Wintershall DEA's Chief Executive Officer will be determined by BASF, with the Deputy Chief Executive Officer being determined by L1 Energy. The company shall be headquartered jointly in Hamburg and Kassel.
Lord Browne, the Executive Chairman of L1 Energy and Chairman of the Supervisory Board of DEA, said: "Wintershall DEA will be one of Europe's largest independent E&P Companies, with the scale needed to generate sustainable growth long into the future. We look forward to creating jointly with BASF a new company, with activities in new places, new perspectives and new prospects for the future"
In the coming months, L1 Energy and BASF will prepare and conduct a confirmatory due diligence process and negotiate definitive transaction agreements. Closing could be expected in the second half of 2018, subject to customary regulatory approvals. Until closing, DEA and Wintershall will continue to operate as independent companies. There is no assurance that LetterOne and BASF will enter into definitive transaction agreements or that the intended transaction will be consummated.
In order to form Wintershall DEA, it is intended that L1 Energy will contribute DEA into Wintershall against issuance of new shares to L1 Energy. Based on the valuation of the exploration and production businesses, BASF shall initially hold 67% and L1 Energy shall hold 33% of Wintershall DEA. In this shareholding ratio, Wintershall's gas transportation business is not accounted for. As of closing, Wintershall DEA shall issue a mandatory convertible bond to BASF reflecting the value of Wintershall's gas transportation business. No later than 36 months after closing, this bond shall be converted into additional shares in Wintershall DEA for BASF.
DEA's average production in 2016 was 138,000 barrels of oil equivalent (BOE) per day. The combined business would have had pro-forma production of approximately 590,000 BOE per day in the same period. Based on the combined proven reserves (1P) of 2.1 billion BOE at the end of 2016, the reserve to production ratio of the combined business would be around 10 years.
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