BASF and LetterOne Merge Oil & Gas Divisions

02.10.2018 -

Following last December’s letter of intent, BASF and LetterOne have now signed a definitive agreement to merge their oil and gas businesses into a joint venture, which will operate as Wintershall DEA.

“With Wintershall DEA we create the leading independent European exploration and production company with international operations in core regions. By combining the two German-based entities, BASF and LetterOne lay the basis for further profitable growth,” said Hans-Ulrich Engel, BASF’s vice chairman and chief financial officer. 

The companies added that they plan to list Wintershall DEA through an initial public offering (ipo) “in the medium term”.

BASF will initially hold a 67% stake in the jv, with LetterOne, a Luxembourg-based consortium of Russian investors, holding the remainder. The German chemical group will also receive additional preference shares to reflect the value of Wintershall’s gas transportation business. These preference shares will be converted into ordinary shares no later than 36 months after the transaction closes, if not before the ipo, taking BASF’s stake up to 72.7%.

The combined business had pro-forma sales of €4.7 billion in 2017 and an EBITDA of €2.8 billion. Pro-forma hydrocarbon production was around 575,000 barrels of oil equivalent (BOE) per day and the partners are aiming to increase this to between 750,000-800,000 BOE between 2021 and 2023. BASF said the jv will have a regionally more balanced footprint with growth opportunities in the core regions.

The transaction is expected to close in the first half of 2019, subject to approvals. Synergies of at least €200 million are expected as of the third year after closure.

Wintershall CEO Mario Mehren will become chairman of the management board and CEO of the jv, while Maria Moraeus Hanssen, CEO of DEA, will become deputy CEO and chief operating officer. A chief financial officer will be chosen at a later date.