Southwestern Energy Co. announced plans to acquire Houston-based Indigo Natural Resources on June 2 for $2.7 billion, including debt, as strategic consolidation continues to permeate Texas energy transactions.
Spring-based Southwestern Energy, which engages in natural gas, natural gas liquids and oil exploitation, development, production and marketing, is looking to Indigo’s deep Haynesville ties to expand its dry gas and liquids inventory.
Southwestern selected Skadden, Arps, Slate, Meagher & Flom as legal advisor and Goldman Sachs & Co. as financial advisor.
Houston-based M&A partners Frank Bayouth, Eric Otness and Cody Carper with associate Christopher Baeza led the Skadden team along with assistance from capital markets partner Michelle Gasaway of Los Angeles; banking partner K. Kristine Dunn of Los Angeles; New York tax partner Alec Jarvis and associate James Lassiter; Executive compensation and benefits partner Erica Schohn of New York and counsel Timothy F. Nelson of Boston; New York labor and employment law partner David Schwartz; Washington, D.C. environmental counsel Elizabeth Malone; New York antitrust/competition partner Kenneth Schwartz; and New York/Palo Alto intellectual property & technology partner Jose Esteves.
The investment bankers from Goldman were Suhail Sikhtian and Scott Hankey, who are based in Houston, Daniel Korich, who is based out of New York, and Marshall Coltrain, who is in Houston.
Chris Lacy serves as vice president, general counsel and corporate secretary at Southwestern. Before joining the company, Lacy practiced at Dewey & LeBoeuf and Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, focusing on energy.
Kirkland & Ellis advised Indigo on legal matters and Credit Suisse Securities (USA) acted as financial advisor.
The team also included oil and gas partner Rahul Vashi of Houston and associate Jordan Silverman of Austin; Houston capital markets partner Matt Pacey and associate Anthony Sanderson; Houston tax partner Mark Dundon; and executive compensation partner Stephen Jacobson of Houston and associate Deidre Kalenderian of Boston.
Indigo general counsel Bobby Hunt, who joined the company in 2016 and started his career at Vinson & Elkins, and assistant general counsel Grant Jones led the transaction internally.
Indigo, the third largest natural gas producer in the country, counts Trilantic, Yorktown Partners, Ridgemont, Beland and RoyOMartin among its financial partners.
The $2.7 billion consideration for the Southwestern-Indigo combination consists of $400 million in cash, about $1.6 billion in Southwestern common stock – about 339 million shares – and the assumption of $700 million of 5.375% senior notes due 2029.
Kirkland & Ellis also advised Indigo on the $700 million notes offering.
With the acquisition, Southwestern will assume about $1.1 billion in debt.
Yet, the company noted the addition of Indigo’s assets could create opportunities to vertically integrate its business as it looks to shore up its balance sheet and free cash flow.
And Indigo’s access to markets in the Gulf Coast and Appalachia and reach within Haynesville and Bossier plays could also be a boon should the transaction close.
The acquisition is expected to close in the fourth quarter, pending Southwestern shareholder and regulatory approvals. Both boards of directors have already approved the deal.
This isn’t Southwestern’s first large-scale acquisition within the past year.
The company acquired Montage Resources for $849 million in November, unveiling both a senior notes and common stock offering – with Latham & Watkins advising Southwestern on both capital markets transactions – to fund the deal in August.
Skadden’s Bayouth and Otness also counseled Southwestern on the acquisition, while Norton Rose Fulbright advised Montage and V&E counseled EnCap Investments, Montage’s largest shareholder.