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.
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.
