Mergers & Acquisitions

BASF and LetterOne sign agreement to merge Wintershall and DEA

BASF and LetterOne sign agreement to merge Wintershall and DEA
Photo courtesy of BASF

BASF and LetterOne have signed a merger agreement to combine their respective oil and gas businesses Wintershall and DEA to create an independent European oil and gas company. The new company called Wintershall DEA will be headquartered in Kassel and Hamburg.

“With Wintershall DEA we create the leading independent European exploration and production company with international operations in core regions. By combining the two German-based entities, BASF and LetterOne lay the basis for further profitable growth,” said Hans-Ulrich Engel, vice chairman of the Board of Executive Directors and chief financial officer of BASF SE. In the medium term, BASF and LetterOne envisage to list Wintershall DEA through an initial public offering (IPO).

Under the deal, LetterOne will put all its shares in a vehicle of Russian billionaire Mikhail Fridman’s DEA into Wintershall Holding GmbH against the issuance of new shares of the company to LetterOne.

BASF will initially hold 67% and LetterOne 33% of Wintershall DEA’s ordinary shares.

Closing of the transaction is expected in the first half of 2019, subject to approvals of merger control and foreign investment authorities as well as mining authorities and the German Federal Network Agency. Until closing, Wintershall and DEA will continue to operate as independent companies.

The new independent company will be led by the chief executive of Wintershall, Mario Mehran, and Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and chief operating Officer of the joint venture.

The joint venture will have a regionally more balanced footprint with growth opportunities in the core regions and strives for a daily production of 750,000 to 800,000 barrels of oil equivalent (boe) between 2021 and 2023.

Through the merger, synergies of at least EUR200 million (USD233.9 million) per year are expected as of the third year following the closing of the transaction.

In 2017, the combined business of Wintershall and DEA had pro-forma sales of EUR 4.7 billion (USD5.5 billion), income from operations before depreciation and amortization (EBITDA) of EUR2.8 billion (USD3.2 billion) and net income of EUR740 million (USD865.4 million).

In 2017, pro-forma hydrocarbon production of Wintershall and DEA totaled 210 million boe; this equals a production of around 575,000 boe per day.

The oil and gas business of BASF is bundled in the Wintershall Group consisting of Wintershall Holding GmbH and its subsidiaries, including the gas transportation business. The oil and gas business of LetterOne comprises DEA Deutsche Erdöl AG and its subsidiaries.

Wintershall, headquartered in Kassel, Germany, focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East. Together with Gazprom, Wintershall is also active in the transportation of natural gas in Europe. The company has about 2,000 employees worldwide and is Germany’s largest, internationally active oil and natural gas producer.

DEA operates in the field of exploration and production of crude oil and natural gas and is headquartered in Hamburg, Germany. The company has long-standing experience along the entire value chain of the upstream business.

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