BASF and LetterOne have reached an agreement to merge their oil and gas businesses, Wintershall and DEA, to form a joint venture operating under the name Wintershall DEA. With this move, the two companies will create the leading independent European exploration and production company with an international reach.
In 2017, the combined business of Wintershall and DEA achieved pro-forma sales of €4.7 billion, EBITDA of €2.8 billion and net income of €740 million. In 2017, pro-forma hydrocarbon production of Wintershall and DEA totaled 210 million barrels of oil equivalent (BOE); this equals a production of around 575,000 BOE per day.
The joint venture will have a regionally more balanced footprint with growth opportunities in the core regions and strives for a daily production of 750,000 to 800,000 BOE between 2021 and 2023. Through the merger, synergies of at least €200 million per year are expected as of the third year following the closing of the transaction.
Mario Mehren, Chief Executive Officer (CEO) of Wintershall, will be the Chairman of the Management Board and CEO of Wintershall DEA. Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and Chief Operating Officer of the joint venture. In addition, Thilo Wieland, member of the Board of Executive Directors of Wintershall, and Hugo Dijkgraaf, Managing Director of Wintershall Norge, will be on the five-member Management Board of Wintershall DEA. The appointment of the Chief Financial Officer has yet to be announced.
To bring about the merger, LetterOne will contribute all its shares in DEA Deutsche Erdöl AG into Wintershall Holding GmbH against the issuance of new shares of the company to LetterOne. The newly formed Wintershall DEA will be headquartered in Kassel and Hamburg. BASF will initially hold 67% and LetterOne 33% of Wintershall DEA’s ordinary shares reflecting the value of the respective exploration and production businesses of Wintershall and DEA. To reflect the value of Wintershall’s gas transportation business, BASF will receive additional preference shares. No later than 36 months after closing but in all cases before an IPO, these preference shares will be converted into ordinary shares of the company Wintershall DEA. This will result in a total shareholding of BASF in Wintershall DEA of 72.7%.
The transaction is expected to close in the first half of 2019, subject to the necessary approvals from merger control, foreign investment authorities, mining authorities and the German Federal Network Agency.
About Wintershall and DEA
The oil and gas business of BASF is combined 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.
DEA operates 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. With its workforce of around 1150 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, it is also active in the transportation of natural gas in Europe. The company has about 2000 employees worldwide and is Germany’s largest, internationally active oil and natural gas producer.