Expansion BASF and Letter One Merge Oil and Gas Subsidiaries
The companies have signed a letter of intent to combine their respective oil and gas businesses and carry out a joint venture under the name Wintershall DEA. The new firm is expected to be one of the largest independent European exploration and production companies.
Ludwigshafen/Germany – BASF and Letter One have recently signed a letter of intent to merge their respective oil and gas businesses in a joint venture, which would operate under the name Wintershall DEA. The oil and gas business of BASF is bundled in the Wintershall Group consisting of Wintershall Holding and its subsidiaries, including the gas transportation business.
The oil and gas business of Letter One comprises DEA Deutsche Erdöl and its subsidiaries. By combining these two German-based entities, their parent companies strive to create a basis for further profitable growth, optimize the portfolio footprint of the combined business and realize synergies. Wintershall DEA would have significant growth potential and be one of the largest independent European exploration and production companies. In the medium term, BASF and Letter One envisage to list Wintershall DEA through an initial public offering.
In the coming months, BASF and Letter One will prepare and conduct a confirmatory due diligence and negotiate definitive transaction agreements. Closing could be expected in the second half of 2018, subject to customary regulatory approvals. Until the closing, Wintershall and DEA will continue to operate as independent companies. There is no assurance that BASF and Letter One will enter into definitive transaction agreements or that the intended transaction will be consummated.
It is intended to form Wintershall DEA by Letter One contributing all its shares in DEA Deutsche Erdöl into Wintershall against issuance of new shares to Letter One. Based on the valuation of the exploration and production businesses, BASF shall initially hold 67 % and Letter One shall hold 33 % in Wintershall DEA.
In this shareholding ratio, Wintershall’s gas transportation business is not accounted for. As of closing, Wintershall DEA shall issue a mandatory convertible bond to BASF reflecting the value of Wintershall’s gas transportation business. No later than 36 months after closing, this bond shall be converted into new shares in Wintershall DEA, resulting in a higher shareholding ratio for BASF.