Under the terms, Independence will merge into a new parent, which will become publicly traded at closing. Contango will become a subsidiary of that new parent.
It’s an all-stock transaction. Independence holders will own 76% of the combined company and Contango holders 24%.
Based on Contango’s closing stock price of $5.62 on June 7, the combined company will have an initial equity market capitalization of $4.8 billion and enterprise value of $5.7 billion.
Contango recently traded at $5.59, off 0.6%. The stock has traded on Tuesday up as much as 23% at a 52-week high $6.94. The shares had more than tripled in the past six months as oil prices have risen.
Independence has holdings across the Eagle Ford, Rockies, Permian and Mid-Continent. Contango, Fort Worth, Texas, has assets primarily in the Mid-Continent, Permian and Rockies areas.
The combined business will be managed by KKR’s Energy Real Assets team. David Rockecharlie, head of KKR Energy Real Assets, will serve as chief executive.
Contango’s chairman and largest holder, John Goff, will be chairman of the combined company.
The senior leadership of Contango, including Chief Executive Wilkie Colyer, will continue managing the company as an operating subsidiary of the new parent.
The companies expect the new parent to be based in Houston and trade on the New York Stock Exchange under a new ticker symbol.
They hope to close the deal late in Q3 or early in Q4, subject to conditions including regulatory clearances and a vote of Contango holders.
In other oil news, OPEC and its oil-producing allies, known as OPEC+, agreed last week to continue to gradually ease production cuts.
The original plan, agreed on in April, was to return 2.1 million barrels per day to the market between May and July 2021.
And on May 26, TheStreet.com Founder Jim Cramer discussed Exxon Mobil (XOM) and big oil’s path to "investability."