APA Corporation and Callon Petroleum Company entered into a definitive agreement under which APA will acquire Callon in an all-stock transaction valued at approximately $4.5 billion, inclusive of Callon’s net debt.
Under the terms of the all-stock transaction, each outstanding share of Callon common stock will be exchanged for 1.0425 shares of APA common stock, representing an implied value to each Callon share of $38.31 per share based on the closing price of APA common stock on Jan. 3. APA is expected to issue approximately 70 million shares of common stock in the transaction. After closing, existing APA shareholders are expected to own approximately 81% of the combined company and existing Callon shareholders are expected to own approximately 19% of the combined company.
APA expects to retire the existing debt at Callon and replace it with APA term loan facilities totaling $2 billion. The term loan facilities are expected to offer improved optionality for near-term debt reduction. JPMorgan Chase Bank, Citigroup Global Markets and Wells Fargo Bank jointly provided $2 billion of committed financing for the deal.
The transaction is expected to be accretive to all key financial metrics and add to APA’s inventory of short-cycle opportunities. Callon’s assets provide additional scale to APA’s operations across the Permian Basin, most notably in the Delaware Basin, where Callon has nearly 120,000 acres.
The transaction was unanimously approved by the boards of directors of both APA and Callon and is expected to close during Q2/24, subject to customary closing conditions, termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and approval of the transaction by shareholders of both APA and Callon. Upon the closing of the transaction, a representative from Callon will join the APA board. APA’s executive management team will lead the combined company, with the combined company’s headquarters remaining in Houston.
“This transaction is aligned with APA’s overall portfolio strategy and fits all the criteria of our disciplined approach to evaluating external growth opportunities. Callon has built a strong portfolio in the Permian Basin that is complementary to our existing Permian assets and rounds out our opportunity set in the Delaware,” John J. Christmann IV, APA’s CEO and president, said. “The acquisition is accretive and unlocks value for both shareholder bases, as increased scale will enable us to realize significant overhead and cost-of-capital synergies. The pro forma footprint in the Permian will also create opportunities to capture meaningful operating synergies.”
“We are very proud of the significant steps we have taken to enhance Callon’s asset base, operational performance and balance sheet over the past several years,” Joe Gatto, Callon’s president and CEO, said. “This combination with APA now provides for an enhanced value proposition for our shareholders built on their depth of experience and strong execution in the Permian Basin, flexibility for increased capital allocation, and ongoing delineation and optimization efforts. Importantly, I would like to personally thank each and every Callon employee for their role in building this company. I am very proud of this team and what we have achieved together.”
