Kimmeridge Makes $2.1 Billion Offer for SilverBow, Proposing Pipeline Assets Merger

(Reuters) — Kimmeridge Energy Management has submitted a new offer to acquire SilverBow Resources that values the U.S. oil and gas producer at close to $2.1 billion, including debt, the investment firm said on Wednesday.

The offer is a variation of previous unsuccessful bids for SilverBow that Kimmeridge has mounted over the last two years, combining SilverBow with Kimmeridge's gas-producing assets in South Texas, which Kimmeridge values at about $1.4 billion, including debt.

Under Kimmeridge's proposal, SilverBow shareholders would be rolling their equity into the combined company at a valuation of $34 per share, according to a statement, which confirmed an earlier Reuters report.

SilverBow shares gained 3.3% in early trading to $32.77.

In a separate statement, SilverBow said it "will carefully review and consider the proposal to determine the course of action that it believes is in the best interest of the company and all of its shareholders".

As well as contributing its South Texas assets, Kimmeridge would inject $500 million into the combined company to help pay down debt, Kimmeridge's statement said.

"It's really transformative in where it positions this company today," Ben Dell, managing partner of Kimmeridge, told Reuters in an interview, noting he believed a combined company would trade between $60 and $65 per share.

Dell said the improved finances resulting from the deal should allow SilverBow to start paying dividends, and would help it to pursue future acquisition opportunities.

The investment firm would own a majority of the combined company, which would remain publicly listed, and would choose five directors of a nine-person board.

SilverBow said in an open letter to its shareholders on March 1 that it entertained Kimmeridge's previous overtures since July 2022 in vain, because Kimmeridge could not secure the necessary financing.

Kimmeridge's latest offer includes letters from financial institutions that have indicated they are confident they can bankroll the deal.

Addressing previous deal talks, Dell said of SilverBow, they had never done due diligence on Kimmeridge's assets and "never meaningfully engaged in a combination discussion, which has been disappointing".

Kimmeridge is the largest shareholder in SilverBow with a 12.9% stake. Last month, Kimmeridge said it would nominate three directors to join SilverBow's board at its annual shareholder meeting. It said in November it backed calls by another large SilverBow shareholder, Riposte Capital, for board changes to address governance and performance concerns.

SilverBow's operations are in the Eagle Ford shale formation in south Texas, adjacent to Kimmeridge's assets. The tie-up would create one of the biggest energy producers solely focused on the Eagle Ford, benefiting from economies of scale and favorable location for supplying key liquefied natural gas export terminals on the Gulf coast.

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