In an all-stock merger, Fort Worth’s Contango Oil & Gas will combine with Houston’s Independence Energy, the companies announced on June 8.
The combined entity plans to be traded on the New York Stock Exchange and will be headquartered in Houston.
The upstream oil and gas heft of Independence, which was built and continues to be managed by private equity firm KKR’s Energy Real Assets team, is expected to complement Contango’s portfolio of low-decline, producing assets primarily in the Mid-Continent, Permian, and Rockies areas.
Gibson, Dunn & Crutcher advised Contango, which has made four acquisitions in the past 18 months, on legal matters. Jefferies acted as lead financial advisor to Contango with a team led by Ralph Eads.
The Gibson Dunn team includes Houston partner Hillary Holmes, Dallas partner Jeffrey Chapman, New York partner Andrew Kaplan, Houston associates Monika Kluziak, Brian Downs, Zain Hassan, Stefan Koller, Josh Stout, and Nathan Zhang, Los Angeles associate Sarah Graham, and Orange County associate Darren Kerstien.
Houston partner Shalla Prichard is advising on financing. Houston partner James Chenoweth and Houston associate Collin Metcalf are advising on tax aspects, and Dallas partner Krista Hanvey and Dallas associate Gina Hancock are advising on compensation.
Chad McLawhorn, senior vice president and general counsel, joined Contango from Mid-Con Energy Partners, in addition to spending time at Samson Resources Corp. and McAfee & Taft.
Vinson & Elkins acted as legal counsel to Independence and Wells Fargo Securities served as financial advisor.
The V&E corporate team, based in Houston, was led by partners Doug McWilliams and Keith Fullenweider and senior associate Robert Hughes with assistance from senior associate Jackson O’Maley and associate Jordan Fossee.
Houston associates Alex Lewis, Markeya Brown, Breanna Kelly, Mary Busse and Chase Browndorf also advised on corporate matters; Houston and Dallas partner David D’Alessandro, Dallas counsel Dario Mendoza and Houston associate Maddison Riddick on executive compensation/benefits; partners John Lynch and Lina Dimachkieh and associates Curt Wimberly and Lauren Nieman, all of Houston, on tax matters; partner Bryan Loocke, counsel Joclynn Townsend and senior associate Cesar Leyva, all of Houston, on energy transactions/projects; partner Sean Becker and associate Annie Blanc, both of Houston, on labor/employment; partner Matt Dobbins, counsel Larry Pechacek and associate Kevin Moscon, all of Houston, on environmental matters; and Dallas counsel Sarah Mitchell on insurance.
Vinson & Elkins, including its incoming chairman Keith Fullenweider, has a long history of working with KKR.
Kevin Adam led the Wells Fargo Securities team with assistance on the coverage side from Scott Van Bergh.
The transaction has already been approved by both boards of directors, though it is still subject to regulatory and shareholder approvals.
The deal – with an equity value of $4.8 billion and enterprise value of $5.7 billion – is expected to close in the late third quarter.
Fort Worth billionaire and real estate behemoth John Goff was tapped as Contango’s chairman of the board in 2019 and is the company’s largest shareholder of Contango. He has signed an agreement to vote in favor of the transaction. Goff is set to become chairman of the board of directors of the combined company.
Under terms of the definitive agreement, Independence will merge with a new operating subsidiary under the parent company. Contango will then become a subsidiary of that entity.
Upon close of the deal, Independence shareholders will own 76% of the company with Contango’s holding 24% of the combined company. KKR will own approximately 17% of the combined company.
Through an Up-C structure, Contango shareholders will receive Class A common stock and Independence owners will receive Class B common stock that includes limited liability company units.
“While we are proud of what we have accomplished to date, the opportunities to continue to scale profitably in this industry are enormous. In David’s (David Rockecharlie, Head of KKR Energy Real Assets) team at KKR and Independence, we have found like-minded individuals with a scaled and complementary asset base,” said Contango chief executive Wilkie Colyer in a prepared statement. “This partnership helps to accelerate our inorganic growth strategy with a larger balance sheet and lower cost of capital for the benefit of all stakeholders.”