California Resources to merge with Aera Energy in $2.1B accretive deal

California Resources Corporation announced the signing of a definitive merger agreement to combine with Aera Energy in an all-stock transaction. The transaction values Aera at approximately $2.1B inclusive of Aera’s net debt and certain other obligations , and is expected to be immediately accretive. At closing, Aera’s owners will receive 21.2M shares of CRC‘s common stock, equal to approximately 22.9% of CRC’s fully diluted shares. “This strategic transaction will create scale in our operations, generate significant free cash flow, accelerate cash returns to shareholders and expand our energy transition platform,” said Francisco Leon, CRC’s President and Chief Executive Officer. “We remain committed to reducing emissions and this combination will advance our goal to permanently sequester 5 million metric tons per year of CO2 in our underground storage vaults. We are highly confident in our ability to drive sustainable savings that will enhance shareholder returns and deliver meaningful long-term value for our stakeholders. On behalf of CRC, we look forward to working with our new colleagues at Aera. Together, this combination will create an unquestioned leader in energy transition, producing low carbon intensity fuels that California needs while accelerating the decarbonization of the State’s industrial and energy industries.” Erik Bartsch, Aera’s President and Chief Executive Officer, added: “Aera and CRC are two great companies with decades of experience and track records that will serve as a foundation for a strong combination. We are committed to continuing to deliver the energy Californians need today and working to deploy carbon capture at-scale.” Immediately accretive to key financial metrics: Priced at approximately 2.6x enterprise value1 / 2024E Adjusted EBITDAX2,3, the transaction is expected to be immediately accretive to key 2024E financial metrics, and reflects approximately a 45% improvement to operating cash flow per share and 90% accretion to free cash flow per share3. Under the terms of the merger agreement, CRC will issue 21.2 million shares of its common stock to the equity owners of Aera, and refinance Aera’s outstanding debt. CRC has secured a firm commitment for a $500 million bridge loan facility to facilitate closing. At current valuations, the pro forma business would have an enterprise value of approximately $5.6 B, with CRC shareholders owning approximately 77.1% of the combined company.