Concho Resources acquired in $9.7bn deal

January 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

January 2021 Issue

In a transaction that combines two high-quality oil and natural gas industry leaders, independent exploration and production companies ConocoPhillips and Concho Resources have entered into a definitive agreement to merge in an all-stock transaction valued at $9.7bn.

Under the terms of the transaction, which has been unanimously approved by the board of directors of each company, each share of Concho common stock will be exchanged for a fixed ratio of 1.46 shares of ConocoPhillips common stock, representing a 15 percent premium to the closing share price on 13 October 2020.

ConocoPhillips’ acquisition of Concho brings together two companies with the leadership, assets and capital allocation approach to generate growing free cash flow, supported by a top-tier investment-grade balance sheet that provides investors with sustainability, resilience and flexibility.

“The leadership and boards of both companies believe today’s transaction is an affirmation of our commitment to lead a structural change for our vital industry,” said Ryan Lance, chairman and chief executive of ConocoPhillips. “Together, ConocoPhillips and Concho will have unmatched scale and quality across the important value drivers in our business: an enviable low cost of supply asset base, a strong balance sheet, a disciplined capital allocation approach, environmental, social and governance (ESG) excellence and great people.”

According to Mr Lance, the combination of ConocoPhillips and Concho will have competitive advantages across sector fundamentals, creating a company with scale and relevance. Furthermore, with a compelling combination of size, best-in-class assets, financial strength and operating capability, the new ConocoPhillips will be the largest independent oil and gas company, with pro forma production of over 1.5 million barrels of oil equivalent per day. Additionally, the combined company expects to capture $500m of annual cost and capital savings by 2022.

“Through this combination, we are joining a diversified energy company with even more scale and resources to create shareholder value in today’s markets and beyond,” said Tim Leach, chairman and chief executive of Concho Resources. “Thanks to our team, Concho is one of the largest unconventional shale producers in the US, with a high-quality asset base, a culture of operational excellence, safety and efficiency, and a strong balance sheet.”

Upon closing, Mr Leach will join ConocoPhillips’ board of directors and executive leadership team as executive vice president and president. “We look forward to bringing together our complementary operations, teams and cultures to realise the upside potential of this exciting combination,” he added.

Serving as exclusive financial adviser to ConocoPhillips is Goldman Sachs, with Wachtell, Lipton, Rosen & Katz serving as legal adviser. Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are acting as financial advisers to Concho, while Sullivan & Cromwell LLP is acting as legal adviser.

The transaction is subject to the approval of both ConocoPhillips and Concho stockholders, regulatory clearance and other customary closing conditions. The transaction is expected to close in the first quarter of 2021.

Mr Lance concluded: “Opportunities to consolidate quality on the scale of ConocoPhillips and Concho do not come along often, so we are seizing this moment to create a company to lead the necessary transformation of our vital sector for the benefit for all stakeholders in the future.”

Fraser Tennant