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BASF, LetterOne sign letter of intent to merge oil and gas subsidiaries

BASF SE and Letterone Investment Holdings signed a letter of intent to merge their respective oil and gas businesses in a joint venture which would operate under the name Wintershall DEA, BASF announced Dec. 7.

The acquisition, not definitive yet and subject to customary regulatory approvals, is expected to close in the second half of 2018.

BASF's oil and gas business is represented by Wintershall Holding GmbH and its subsidiaries, including the gas transportation business, while that of LetterOne comprises DEA Deutsche Erdoel AG and its subsidiaries. The two would merge to form one of the largest independent European exploration and production companies, BASF said.

BASF will initially hold 67% and LetterOne 33% in Wintershall DEA, with the latter contributing all its shares in DEA Deutsche Erdöl AG into Wintershall against issuance of new shares. The ratio excludes Wintershall's gas transportation business, for which Wintershall DEA will issue a mandatory convertible bond to BASF reflecting the value of the business upon closing.

In 2016, the combined business had pro forma sales of €4.3 billion and overall production volumes of up to 215 million barrels of oil equivalent, BASF noted.

BASF would name the CEO of the combined entity and LetterOne will elect the deputy CEO. The company would be headquartered in Kassel and Hamburg, Germany, and the listing of its shares on the stock exchange is envisaged in the near term, the company added.

DEA has stakes in production facilities and concessions in Germany, Norway, Denmark, Egypt, Algeria and Mexico, while Wintershall focuses on exploration and production in oil and gas-rich regions in Europe, Russia, South America, North Africa, and the Middle East.