BASF and L1 Complete Oil & Gas Merger
BASF and LetterOne (L1), a Luxembourg-based consortium of Russian investors, have completed the merger of their oil and gas subsidiaries Wintershall and DEA following all regulatory approvals.
The new company will operate under the name Wintershall DEA and have dual headquarters at Hamburg and Kassel, the domiciles of the two formerly separate entities, The merger partners project synergies of at least €200 million per year from the third year onward. They plan to complete integration of operations within about a year.
To finalize the transaction, L1 merged all of its shares in DEA (an acronym for Deutsche Erdoel AG) into the BASF-owned Wintershall Holding followed by the issuance of new shares. In the initial phase, BASF will hold 67% and LetterOne 33% of Wintershall DEA’s ordinary shares.
Reflecting the value of Wintershall’s gas transportation business, BASF will receive additional preference shares, which will widen the German chemical giant’s shareholding in the new oil and gas company to 72.7%
Within three years after closing, but prior to an initial public offering (ipo) tentatively planned for the second half of 2020, BASF’s preference shares will be converted into ordinary shares of Wintershall DEA in preparation for the stock launch.
In Wintershall DEA, BASF and L1 claim to have created the leading independent European exploration and production company with international operations in core regions. The market’s new giant will have pro forma sales of €5.7 billion, EBITDA of €3.6 billion and net income of €1.1 billion, based on 2018 figures.
The company is targeting an output of 750,000 to 800,000 barrels of oil equivalent (BOE) per day between 2021-2023, compared with 590,000 BOE per day currently. This is equivalent to an annual production growth rate of 6-8%
Management of Wintershall DEA is in the hands of five board members. Mario Mehren heads the executive board as chairman and CEO. Maria Moraeus Hanssen is deputy CEO and chief operating officer (COO) with responsibility for Europe, the Middle East and Africa. As a member of the executive board, Thilo Wieland is responsible for Russia, Latin America and Midstream. Hugo Dijkgraaf is chief technology officer (CTO) and Paul Smith serves as chief financial officer (CFO).
BASF’s deputy managing board chairman Hans-Ulrich Engel and L1’s Lord Browne of Madingley will act as rotating non-executive chairmen, with Engel holding the position for the first fifteen months.
In its consolidated financial statements from May 1, 2019, BASF will report its participating interest in Wintershall DEA according to the equity method, with an initial valuation at fair value.