German chemicals giant BASF and Russian-owned investment firm LetterOne have finally completed the merger of their respective upstream oil and gas subsidiaries Wintershall and Dea.
The enlarged company — called Wintershall Dea — will be the world's largest privately-held energy company until a stock market flotation, planned for the second half of next year. The timing of the initial public offering is "subject to market conditions", the companies said.
The deal has taken 16 months to complete, with regulatory approvals required from nine countries, including Germany, Norway, the UK and Russia. The new company has assets spanning Europe, Russia, South America, north Africa and the Middle East.
Wintershall and Dea produced a combined 590,000 b/d of oil equivalent (boe/d) last year and generated an aggregate €1.1bn ($1.2bn) of profit. The enlarged firm is on track to increase output to 750,000-800,000 boe/d within four years, based on its existing portfolio.
"Size is very important in this industry. Very rarely do you have the opportunity to create a company of this scale and quality," executive chairman of LetterOne Energy John Browne said. Browne is a long-time proponent of acquisition-led growth, having overseen BP's transformational mega-mergers in the late 1990s.
Wintershall and Dea are a natural fit. They are based in Germany and both view Norway as a core area for investment. Wintershall Dea will be the third-largest producer in Norway, with production of over 200,000 boe/d there in the next few years, according to Wintershall Dea's chief executive Mario Mehren.
Wintershall considered buying Dea from German utility RWE before LetterOne made the purchase in 2015. LetterOne was set up in 2013 by Russia's Alfa Group, a former shareholder in BP's Russian joint venture TNK-BP that was taken over by state-controlled Rosneft. Geopolitical events partly drove LetterOne's Norwegian focus. The company was forced to sell Dea's UK North Sea assets in 2015 over UK government concerns that Russian co-founder Mikhail Fridman might become embroiled in sanctions against Russia.
A stock market flotation for the enlarged firm has been on the cards since the merger was announced in December 2017. Wintershall offers few overlaps with BASF's other businesses.
