Wintershall and DEA to Merge
BASF and LetterOne signed a letter of intent today 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 GmbH and its subsidiaries, including the gas transportation business. The oil and gas business of LetterOne comprises DEA Deutsche Erdöl AG and its subsidiaries. By combining these two German-based entities, their parent companies strive to create a basis for further profitable growth, optimise 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 LetterOne envisage to list Wintershall DEA through an initial public offering.
In the coming months, BASF and LetterOne 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 LetterOne will enter into definitive transaction agreements or that the intended transaction will be consummated. Based on the valuation of the exploration and production businesses, BASF shall initially hold 67% and LetterOne shall hold 33% in Wintershall DEA. In this shareholding ratio, Wintershall’s gas transportation business is not accounted for.
Overall, production volumes of Wintershall and DEA amounted to 215 million barrels of oil equivalent (BOE) in 2016, this equals a production of around 590,000 BOE per day. DEA is operating in the field of exploration and production of crude oil and natural gas and is headquartered in Hamburg, Germany. The company has long-standing experience along the entire value chain of the upstream business. In March 2015, DEA – formerly part of RWE AG – was acquired by LetterOne. With its workforce of around 1,150 employees, DEA has stakes in production facilities and concessions in Germany, Norway, Denmark, Egypt, Algeria and Mexico. Wintershall, headquartered in Kassel, Germany, focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East. Together with Gazprom, Wintershall is also active in the transportation of natural gas in Europe. The company has about 2,000 employees worldwide and is Germany’s largest, internationally active crude oil and natural gas producer.
BASF would determine the chief executive officer and LetterOne the deputy chief executive officer of Wintershall DEA. The company would be headquartered in Kassel and Hamburg, Germany.