CRGY in advanced talks to buy SBOW

[cmm3rd]

(Bloomberg) -- Crescent Energy Inc. is in advanced talks to acquire SilverBow Resources Inc., a rival oil and gas producer that is in a proxy fight with its largest shareholder, according to people familiar with the matter.

SilverBow would be valued at about $2.1 billion in a transaction with Crescent, which is backed and managed by KKR & Co., said the people, who asked to not be identified because the details aren’t public. Though some details could still change, an agreement could be announced as soon as Thursday, the people said.

Representatives for Crescent, KKR and SilverBow declined to comment.

SilverBow, whose shares have gained 11% this year, fell 0.6% to $32.35 in New York trading Wednesday, giving the Houston-based company a market value of about $826 million. Including debt, SilverBow has an enterprise value of about $1.9 billion, according to data compiled by Bloomberg.

Shares of Crescent fell 0.8% to $12.25 on Wednesday for a market value of about $2.2 billion.

The potential offer comes as SilverBow seeks to fend off a board challenge from Kimmeridge Energy Management Co., which owns about 13% of its outstanding shares, according to data compiled by Bloomberg. SilverBow has been feuding with Kimmeridge since the asset manager began building a stake in the company in 2022. Kimmeridge is seeking three seats on SilverBow’s board after dropping its latest takeover offer.

Shareholders were slated to vote by Tuesday on rival slates of board candidates from SilverBow and Kimmeridge. Proxy advisers Institutional Shareholder Services and Glass Lewis both recommended they back SilverBow’s nominees.

SilverBow and Crescent are both active in the Eagle Ford basin, an oil-and-gas-rich stretch of shale in southeastern Texas. Crescent, which is 15% owned by KKR, also has drilling operations in the Rocky Mountain region.

Over the past three years, Crescent has expanded through six transactions — five of them asset deals — valued at more than $2 billion, according to data compiled by Bloomberg. Combined with SilverBow, Crescent will be one of the biggest operators in the Eagle Ford basin, competing with companies including EOG Resources Inc. and ConocoPhillips.

[Fraser921]

An ev of 2.1 b implies 39 takeout price
2.0 billion = $35

This year ebitda was about 200 m

Insiders get paid for options

39 not bad if that’s what the deal is for

CRGY would fall in short term.

[Petroleum economist]

Thanks for sharing. If the offer of $ 2.1 B is inclusive the SBOW $ 1,173 B debt, then the offer equals (2,100-1,173)/25.445 = $ 36.40 per share.
We will have to wait and see whether if the offer would be in cash, shares or a mixture. If the offer is cash then it seems reasonable. If the offer is in shares, then it would be a bit low.

The Crescent offer would be a lot better than Kimmeridge's $ 34.00, which was mostly in dubious KTG assets.

[Fraser921]

Good points.

My numbers assumed all cash. CRGY would fall with shares and it might not be much more than 34-35

No where near Dan's TP of $ 63

1,173 was YE 12/31 debt is 1,096 at end of March, 2024. (79 less debt means 3 more for equity)

Slide 25 says debt is about 1,096

https://s23.q4cdn.com/985396181/files/doc_presentations/2024/05/vF_SBOW-Corporate-Presentation-May-2024.pdf

[Petroleum economist]

More news:

HOUSTON, May 16, 2024--(BUSINESS WIRE)--Crescent Energy Company (NYSE: CRGY) ("Crescent" or the "Company") and SilverBow Resources, Inc. (NYSE: SBOW) ("SilverBow"), today announced that they have entered into a definitive agreement pursuant to which Crescent will acquire SilverBow in a transaction valued at $2.1 billion. The transaction will create a scaled company with a balanced portfolio of high-quality and long-life assets, an attractive, returns-driven financial framework and strong balance sheet, led by a management team and Board with significant operating and investing expertise that is well-positioned to drive long-term growth and value creation.

SilverBow shareholders will receive 3.125 shares of Crescent Class A common stock for each share of SilverBow common stock, with the option to elect to receive all or a portion of the proceeds in cash at a value of $38 per share, subject to possible pro ration with a maximum total cash consideration for the transaction of $400 million.


With 3.125 shares Crescent per share Silverbow, this would mean an off of 3.125* 12.11 (pre-market CRGY share price) = $ 37.84. I think this will go ahead.

[Fraser921]

Option for cash max 400 m, so stock 1.7/2.1 ( Equity 80% cash 20 %)

sbow up 3 in pre market and crgy down 2 %

Arbs will sell CRGY

I wonder if action this will spill over to other names

Press Release

https://s23.q4cdn.com/985396181/files/doc_downloads/2024/05/SBOW-CRGY-Press-Release.pdf

[Fraser921]

Slide deck of deal

https://irpages2.eqs.com/download/companies/270166a/Presentations/Crescent%20Energy%20to%20Acquire%20SilverBow%20Resources_vFF.pdf

webcast at 830 am est

https://www.webcast-eqs.com/register/crescentenergy20240516/en

[Fraser921]

CRGY down 6 % pre market sbow up 9 % so the market.

Pre market prices implies a $36 value and you wait 4 months.
Acquirers get slammed issuing stock like monopoly money , see Vtle 62 to 48 hasn't recovered in last 6 months

Mentioned on call poison pill remains in place so they placed hurdles for competing bids. Therefore, Suggest longs sell sbow and move on