Instant View: Chesapeake to buy Southwestern for $7.4 bln in all-stock deal

Southwestern Energy Co

11/01/2024 13:50

Jan 11 (Reuters) - Chesapeake Energy  CHK.O  said on
Thursday it would buy smaller rival Southwestern Energy  SWN.N 
in an all-stock transaction valued at $7.4 billion, a deal that
would enable the second-largest U.S. natural gas producer to
take the top spot.
    
    COMMENTS:
    PETER MCNALLY, GLOBAL HEAD OF ANALYSTS, THIRD BRIDGE
    "The merger will certainly bring additional scale, a
portfolio that is high graded and synergies ... the challenge
for Chesapeake and Southwestern will be to access more
profitable parts of the natural gas value chain, particularly in
the growing LNG market."
    "Bringing Chesapeake and Southwestern together will reduce
overall costs, but Third Bridge experts see little likelihood of
these companies influencing the price of natural gas."
    
    GABRIELE SORBARA, MANAGING DIRECTOR - EQUITY RESEARCH,
SIEBERT WILLIAMS SHANK & CO LLC
    "All in all, we view the deal as strategically sound and
accretive longer-term with numerous synergies. However, the deal
is negative near-term as it is dilutive to 2024/2025 FCF yield
and net-debt/EBITDA on our initial take."
    "As a result of a reduced FCF yield near-term, Chesapeake's
pro forma capital returns are likely to take a step back,
especially as it is likely to prioritize debt reduction over
buybacks."
    
    MATT PORTILLO, ANALYST, TUDOR PICKERING HOLT
    "The transaction will create the largest pure play natural
gas producer in the United States ... with the combined market
cap likely opening the door for S&P500 inclusion."
    "Scale will improve the company's position on the Gulf
Coast, in our opinion, as it relates to unlocking and securing
additional LNG opportunities ... the combined story likely
attracts significant long-only attention as deal should place
name alongside EQT as one investors will look to own in the 2025
upcycle."

 (Reporting by Mrinalika Roy in Bengaluru; Editing by Shounak
Dasgupta)
 ((mrinalika.roy@thomsonreuters.com))