Devon Energy Corp (NYSE:DVN) saw their shares move higher Monday, on word of a merger with WPX Energy Inc (NYSE:WPX). The Wall Street Journal says the two firms are in talks for a merger that is expected to close sometime this week, a hookup being called “a merger of equals”.
The strategic combination will create a leading unconventional oil producer in the U.S., with an asset base underpinned by a premium acreage position in the economic core of the Delaware Basin.
The combined company, which will be named Devon Energy, will benefit from enhanced scale, improved margins, higher free cash flow and the financial strength to accelerate the return of cash to shareholders through an industry-first "fixed plus variable" dividend strategy.
Under the terms of the agreement, WPX shareholders will receive a fixed exchange ratio of 0.5165 shares of Devon common stock for each share of WPX common stock owned. The exchange ratio, together with closing prices for Devon and WPX on Sept. 25, results in an enterprise value for the combined entity of approximately $12 billion.
Upon completion of the transaction, Devon shareholders will own approximately 57% of the combined company and WPX shareholders will own approximately 43% of the combined company on a fully diluted basis.
The transaction, which is expected to close in the first quarter of 2021, has been unanimously approved by the boards of directors of both companies.
Shares in DVN took on 33 cents, or 3.7%, to $9.15 Monday, while those for WPX acquired 27 cents, or 6%, to $4.71.
