Texas lawyers from Vinson & Elkins and Akin Gump Strauss Hauer & Feld advised on the latest consolidation in the oil and gas industry: the merger of private equity-owned Talos Energy and publicly traded Stone Energy.
The companies claim the combination — which will keep the Talos Energy name — will create a top offshore-focused exploration and production company with an initial equity market capitalization of $1.9 billion and an enterprise value of $2.5 billion.
The one-for-one stock deal will leave Talos stakeholders with 63 percent of the combined company, while Stone shareholders will have 37 percent. Talos will end up with six representatives on the board and Stone will have four seats. The company will be led by Talos CEO Timothy Duncan. Stone chairman Neal Goldman will be non-executive chairman.
The two companies believe that by combining they can save up to $25 million per year from supply chain management and other operational efficiencies by the end of 2018. They also expect to line up a new $1 billion credit facility with a $600 million initial borrowing capacity and no material long-term note maturities until 2022.
The deal is expected to close late in the first quarter or early in the second quarter of next year if Stone stockholders and debt holders approve it.
The markets weren’t too keen on the deal, sending Stone’s shares down more than 15 percent at the close of trading on Tuesday.
Houston-based Talos is backed by Apollo Global Management and Riverstone Holdings, whose plan to take the company public three years ago was scuttled due to a severe drop in oil prices. Lafayette, La.-based Stone filed for bankruptcy last year but emerged this past April.
The V&E team advising Talos was led by Houston partners Steve Gill and Lande Spottswood and associate Connor Long with assistance from attorneys in its New York office.
Dallas partners David Peck and Wendy Salinas, Houston partners Stephen Jacobson and Jason McIntosh, Dallas counsel Katherine Mull, Houston associate Curt Wimberly and Dallas associate Gina Hancock advised on tax and executive compensation and benefits issues.
Houston partner Boyd Carano and senior associate Alan Alexander advised on the deal’s energy transactions/projects aspects. Houston senior associate Brandon Tuck assisted on environmental matters, while Houston partner Brian Moss and senior associate Guy Gribov advised on finance.
V&E’s Washington, D.C. office counseled on the deal’s regulatory and antitrust issues. Paul, Weiss, Rifkind, Wharton & Garrison also counseled Talos.
Talos’ general counsel is Bill Moss, who joined the company in 2013 from Mayer Brown’s Houston office. He had previously represented Talos as outside counsel in its initial formation and its subsequent acquisition of Energy Resource Technology from Helix Energy Solutions Group in 2013 for $620 million.
Moss also represented Pine Brook Partners-backed Phoenix Exploration Co. on its initial formation, acquisitions and ultimate sale to Apache Corp. in 2011 for around $400 million. Before Mayer Brown, the University of Texas law graduate worked at Baker Botts.
Akin Gump counseled Stone, with a team led by partner John Goodgame and senior counsel Rebecca Tyler in Houston.
Others pitching in were partners Alison Chen on tax matters and David Sweeney on oil and gas; Brian Patterson on labor; and associates Mary Lovely, Michelle Moreland, Leana Garipova, John McEntire, Allyson Li, Scott Friedman Niki Roberts and Shane Sullivan. All of them are based in Houston.
Akin Gump also tapped attorneys in its New York office on financial restructuring and finance issues; its Washington, D.C. office on environmental, regulatory and executive compensation issues; and its Los Angeles office on executive compensation/benefits and environmental issues.
Stone’s general counsel is Lisa Jaubert, who previously was counsel at Latham & Watkins, assistant general counsel at Mariner Energy, a founding shareholder of Schully Roberts Slattery Jaubert & Marino (now Slattery, Marino and Roberts) and an outsourced general counsel for many smaller exploration and production companies.
Financial advisers included Citigroup and UBS for Talos and Petrie Partners Securities for Stone.