Oil giant Chesapeake Energy Corp. (NASDAQ:CHK) will acquire Southwestern Energy Co. (NYSE:SWN) in an all-stock deal valued at $7.4 billion, or $6.69 per share, based on Chesapeake’s closing price on January 10. As a part of this transaction, Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each share of outstanding Southwestern common stock at closing.
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Following the announcement, shares of Southwestern Energy slid in pre-market trading as the acquisition values SWN at $6.69 per share, lower than its closing stock price of $6.89 on Wednesday. SWN stock has jumped by more than 20% in the past year.
The acquisition is anticipated to be accretive to all key per-share financial metrics, including operating cash flow, free cash flow, and cash dividends. The merger will result in the formation of a top-tier energy company with a strong natural gas portfolio near high-demand markets, robust inventory, resilient cash flow, and a solid balance sheet. The combined company will have a new name and provide users with affordable, lower-carbon energy.
The combined company is expected to have an enterprise value of around $24 billion. Following the acquisition, Chesapeake shareholders will own around 60%, and Southwestern shareholders will own the remaining 40% of the combined company on a fully diluted basis.
The acquisition is expected to close in the second quarter of this year.
Is CHK Stock a Good Buy?
Analysts remain cautiously optimistic about CHK stock with a Moderate Buy consensus rating based on seven Buys and Holds each. CHK stock has slid by more than 9% in the past year, and the average CHK price target of $99.38 implies an upside potential of 28.8% at current levels.
