Callon Petroleum has agreed to acquire Carrizo Oil & Gas for $3.2 billion, with shareholders of Carrizo set to receive 2.05 shares of Callon for each share they hold. That represents $13.12 per Carrizo share based on Callon’s closing common stock price on July 12 and a 25 percent premium to Carrizo’s prior day closing price. Pro-forma, Callon shareholders will own 54 percent of the combined company and 46 percent will be held by former Carrizo owners. “This deal checks a lot of the boxes on what seems to make sense for corporate-level E&P M&A,” said Drillinginfo M&A analyst Andrew Dittmar. “You have two small-to-midsize companies active in the Delaware Basin combining to build economies of scale, reduce G&A expenses, and hopefully accelerate the move to positive free cash flow.” With the all-stock consideration, Callon is building scale while preserving cash on the balance sheet for development and avoiding having to attempt raising additional capital from a frozen Wall Street. It can also leverage the slightly higher valuation its stock carries over Carrizo. While not exactly a “merger-of-equals” they are similar sized companies and the post-deal shareholder split will be a relatively even with 54 percent buyer, 46 percent seller.… continue reading
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Source: CTRM Center