Chesapeake Energy Corp. (NASDAQ:CHK) will acquire Plano-based Vine Energy Inc. (NYSE:VEI), adding to the company's natural gas properties in the over-pressured stacked Haynesville and Mid-Bossier shale plays in Northwest Louisiana. The acquisition is a zero premium transaction valued at approximately $2.2 billion, based on a 30-day average exchange ratio as of Aug. 10's close, equating to $15.00 per share.
Vine is 70% owned by the Blackstone Group Inc. and Blackstone becomes a Chesapeake Energy shareholder as part of the deal.
The acquisition by the once high-profile Chesapeake Energy comes after the company exited Chapter 11 bankruptcy protection in February and named Mike Wichterich as interim CEO of the Oklahoma City-based energy firm in April.
The U.S. shale space has been active this year. According to Bloomberg there have been about 47 shale takeover this year valued at $50 million or more. That already tops shale takeovers in 2020. Investors have been pressuring companies to consolidate to increase profits after several years of poor results.
"This transaction strengthens Chesapeake's competitive position, meaningfully increasing our free cash flow outlook and deepening our inventory of premium gas locations, while preserving the strength of our balance sheet," said Wichterich, in a news release. "By consolidating the Haynesville, Chesapeake has the scale and operating expertise to quickly become the dominant supplier of responsibly sourced gas to premium markets in the Gulf Coast and abroad."
David Foley, Global Head of Blackstone Energy Partners added, "We believe in the benefits of consolidation. Blackstone looks forward to being a Chesapeake shareholder and participating fully in the significant value creation potential that will be unlocked by the combined company."
Transaction Details from Chesapeake Energy news release:
Under the terms of the merger agreement, which was unanimously approved by the Board of Directors of each company, Vine shareholders will receive a fixed exchange ratio of 0.2486 Chesapeake shares of common stock and $1.20 of cash for each share of Vine common stock owned. Upon closing, Chesapeake shareholders will own approximately 86% and Vine shareholders will own approximately 14% of the fully diluted shares of the combined company.
The transaction, which is subject to customary closing conditions, including certain regulatory approvals, and the approval of Vine shareholders, is expected to close in the fourth quarter of 2021. Funds managed by The Blackstone Group Inc. own approximately 70% of outstanding shares of Vine common stock and have entered into a support agreement to vote in favor of the transaction.
J.P. Morgan Securities LLC is serving as financial advisor, Latham & Watkins LLP and Richards Layton & Finger are serving as legal advisor, and DrivePath Advisors is serving as communications advisor to Chesapeake. Citi is serving as lead financial advisor and Kirkland & Ellis LLP is serving as legal advisor to Vine. Weil, Gotshal & Manges LLP is serving as legal advisors to Blackstone. Houlihan Lokey also served as a financial advisor to the Vine Board of Directors.
Chesapeake Energy on Tuesday reported a loss of $439 million in its second quarter.
The Oklahoma City-based company said it had a loss of $4.48 per share. Earnings, adjusted for non-recurring costs, came to $1.64 per share.
The oil and gas company posted revenue of $693 million in the period.
The Associated Press contributed to this report.
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