BASF and LetterOne to Merge their Oil & Gas Businesses
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BASF and LetterOne to Merge their Oil & Gas Businesses

By IndraStra Global News Team

BASF and LetterOne to Merge their Oil & Gas Businesses

Image Attribute: An off-shore oil rig /

On September 28, 2018, The German chemical company, BASF announced that it had signed an agreement with LetterOne on September 27, to merge their "Oil & Gas" businesses and create a new joint venture called - Wintershall DEA. Earlier in December 2017, a "letter of intent" for the same was signed between both the companies.

Wintershall is the exploration-and-production arm of BASF and the DEA Group is owned by LetterOne, an investment vehicle of Russian magnate Mikhail Fridman. 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.

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. As of closing, Wintershall DEA shall issue a mandatory convertible bond to BASF reflecting the value of Wintershall’s gas transportation business. No later than 36 months after closing, this bond shall be converted into new shares in Wintershall DEA, resulting in a higher shareholding ratio for BASF. At that point, BASF's stake in Wintershall DEA will rise to 72.7%.

The new joint venture will be the largest independent European exploration and production company, with activity in twelve countries across Europe, Latin America, North Africa, and the Middle East. The deal is expected to be closed in the first half of 2019, pending approval of merger control, regulators and the German Federal Network Agency, BASF said.

Mario Mehren, Chief Executive Officer (CEO) of Wintershall, will be the CEO of Wintershall DEA. Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and Chief Operating Officer. 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 will be announced in due course.

As for the Friday morning, shares of BASF in the Frankfurt Stock Exchange are currently trading at €75.74 at 2:54 PM GMT+2, 3.34% below the previous day’s close.

With reporting by BASF News Release, Frankfurt Stock Exchange, and Reuters