Publicly traded Crescent Energy Co., which counts KKR as a major investor, announced Thursday it reached a $2.1 billion agreement to buy SilverBow Resources Inc., which is in the midst of a proxy fight with investor Kimmeridge.
SilverBow shareholders will receive 3.125 shares of Crescent Class A common stock for each of their shares. They will have the option to receive all or a portion of the proceeds in cash at a value of $38 per share, not to exceed $400 million.
The stock swap represents an 18 percent premium over SilverBow’s closing price on Wednesday.
Bloomberg News reported early Thursday that the companies were in advanced talks.
Crescent shareholders will end up owning between 69 percent and 79 percent of the combined company. SilverBow shareholders will hold between 21 percent and 31 percent, depending on the final cash consideration at closing.
The transaction is targeted to close by the end of the third quarter of this year if it clears the shareholders of each company and regulators. Afterward, the Crescent board of directors will increase to 11 members with the addition of 2 directors to be designated by SilverBow.
The deal follows Crescent’s accretive acquisition strategy while building scale in South Texas’ Eagle Ford shale, TPH&Co analyst Oliver Huang wrote in a note.
Crescent tapped Jefferies and Wells Fargo as financial advisors. Wells Fargo Bank has also provided $2 billion of committed financing for the transaction.
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The company used Vinson & Elkins as outside counsel with a deal team led by partners Doug McWilliams, Robert Hughes and Jackson O’Maley and senior associate Jordan Fossee. Also advising were partner Keith Fullenweider, senior associates Alex Lewis and Jimmy Chalk and associates Zac Horne, Chase Browndorf, Phil Greenfield, Michelle Yang, Josh Rutenberg and Matthew Rando (mergers & acquisitions and capital markets).
Other key team members included partners John Lynch and Lina Dimachkieh, senior associate Curt Wimberly and associate Sarah Coe (tax), partners David D’Alessandro and Patricia Adams and associates Matt Green and Henry Crowell (executive compensation/benefits), partners David Wicklund and Caitlin Turner and senior associate Maya Bobbitt (finance), partner Danielle Patterson, counsel Megan Menniti and associates Zach Parker, Rammy Allouche and Brian Park (energy transactions).
Also advising were partner Matt Dobbins and associate Kelly Rondinelli (environmental), partner Hill Wellford and counsel Evan Miller (antitrust), partner Sean Becker and associate Andrew Cox (labor/employment), partners Michael Holmes and Jeff Crough and associate Christina Peterman, counsel Rajesh Patel and associate Alexa Chally (intellectual property) and Nate Richards (MACM).
The special committee retained Intrepid Partners as financial advisor and Richards, Layton & Finger as counsel. Intrepid used Baker Botts for advice, including partner Josh Davidson and senior associate Catherine B. Ellis.
SilverBow’s financial advisors were BofA Securities Inc. and Evercore and its counsel is Gibson, Dunn & Crutcher with a corporate team led by partners Stephen Olson, Tull Florey, Hillary Holmes and Andrew Kaplan.
The group included partner Rahul Vashi, of counsels Adam Whitehouse and Justine Robinson and associates Jonathan Sapp, Alec Chapman, Caroline Bakewell, Benjamin Blefeld, Malakeh Hijazi, Tukeni Obasi, Jay Pak, Elizabeth Romefelt and Andrew Watson.
Partner Cromwell Montgomery advised on financing, senior counsel Gregory Nelson and associate Nathan Sauers on tax, partner Krista Hanvey and associate John Curran on benefits, partner Lori Zyskowski, of counsel Paul Michael Jindra and associate Michael Svedman on governance matters and partner Michael Murphy on environmental aspects.
This past March, Kimmeridge, which owns 13 percent of SilverBow’s stock, announced March 13 it delivered to the SilverBow board a proposal to contribute Kimmeridge Texas Gas assets to SilverBow in exchange for 32.4 million shares priced at $34 per share. Plus it would inject $500 million of fresh equity capital at the same per-share price in exchange for 14.7 million shares.
About a month later, Kimmeridge announced it withdrew its proposal to combine KTG with SilverBow and threatened a proxy fight at SilverBow’s annual meeting scheduled for May 21.
Crescent and SilverBow billed the transaction as creating a scaled company with a balanced portfolio of high-quality and long-life assets, an attractive, returns-driven financial framework and a strong balance sheet.
“This is a compelling transaction for shareholders of both companies, creating a premier growth through acquisition platform,” Crescent chairman and major shareholdee John Goff said in the press release announcing the deal. “We look forward to welcoming the SilverBow team as we continue to build this company.”
Crescent CEO David Rockecharlie added that the combination with SilverBow is expected to be immediately accretive to all key per share metrics.
“The SilverBow team has built a complementary and high-quality position in the Eagle Ford, and we believe the combination offers a unique value proposition in our evolving sector,” he said.
SilverBow CEO Sean Woolverton said the deal delivers an attractive premium to SilverBow shareholders with a choice “to opt into the significant upside, sustainable value and meaningful synergies that we see in this combination by receiving Crescent shares” or to receive immediate cash liquidity.
“This combination of two strong companies positions the pro forma business for continued success above and beyond what either company could achieve on its own,” he said.
Goff will continue as non-executive chairman and Rockecharlie as CEO of the combined company.