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BASF in talks to merge its oil and gas unit with private investment firm

BASF announced last Friday that it is in discussions regarding a potential merger of BASF Group’s oil and gas activities with Letter One’s oil and gas activities bundled in the DEA Group. BASF would hold the majority of the shares in the joint enterprise. An initial public offering (IPO) of the joint enterprise would be an option in the medium term.

“The outcome of the discussions is open and there is no assurance that any transaction will be consummated,” BASF said in the announcement.

BASF’s oil and gas activities are bundled in the Wintershall Group. Wintershall focuses on exploration and production in oil and gas-rich regions in Europe, North Africa, Russia, South America and the Middle East. Together with Gazprom, the company is also active in the transport of natural gas in Europe. For the full year of 2016, the Oil & Gas segment of the BASF Group netted sales amounting to around EUR2.8 billion (USD3.34 billion), EBITDA was around EUR1.6 billion (USD1.91 billion) and EBIT was around EUR500 million (USD596.32 million).

Letter One, which is headquartered in Luxembourg, with offices in London and New York City, is a private investment firm. Its investments are focused on the telecoms, technology and energy sectors through its two main business units, L1 Energy and L1 Technology.

L1 Energy has been working with DEA to refocus it on its core competencies; to rebalance its portfolio based on value and growth prospects; to optimise its business model for a low oil price market; and, to accelerate its growth by making capital available for selective business development. The executive chairman of L1 Energy is former BP Chairman John Browne.

DEA’s activities are concentrated in five core countries: Norway, Germany, Denmark, Egypt and Algeria. Non-core positions around the world continue to be divested or discontinued with strict limits to spending on exploration. DEA is also ‘incubating’ in new geographies, including Mexico and Brazil, where L1 Energy believes that the company can create long-term value.

In a statement, BASF said it “does not intend to make any additional comments on this matter at this time.”