Diamondback Energy Inc. agreed to take out fellow Permian Basin driller Energen Corp., a recent target of activist investors, in an all-stock transaction worth about $9.2 billion.
The deal includes Energen's net debt of about $830 million as of June 30, according to an Aug. 14 news release. Consideration for the deal will consist of 0.6442 share of Diamondback common stock per share of Energen common stock, resulting in an implied value of $84.95 per share to Energen shareholders based on the closing price Aug. 13. Energen shares, which closed at $73.14 on Aug. 14, spiked after the deal announcement following the close of trade, reaching nearly $79 by about 5 p.m. ET.
Upon closing of the transaction, Diamondback shareholders would own roughly 62% of the combined company, while Energen shareholders would own about 38%.
Diamondback's acquisition would add more than 266,000 net tier-one acres in the Permian, an increase of about 57% to the company's current tier-one acreage.
"The process examined our business plan, competitive positioning, and strategic alternatives," Energen Chairman and CEO James McManus said in a news release. "We believe this all-stock transaction with Diamondback is the best path forward for our company and provides Energen shareholders with an excellent value for their investment, now and in the future." Diamondback shares fell more than 6% in after-market trading, reaching about $125 at 5 p.m. ET.
The deal was approved by all board members of each company. The transaction is expected to close by the end of 2018.
Activist investor Carl Icahn and protege Keith Meister of Corvex Management LP in May announced a team-up to explore a takeover of Energen. Together, Icahn and Corvex own 9.9% of Energen's stock.
Citigroup Global Markets Inc. is acting as exclusive financial adviser to Diamondback, while Akin Gump Strauss Hauer & Feld LLP is the company's legal adviser. J.P. Morgan Securities LLC and Tudor Pickering Holt & Co. are exclusive financial advisers to Energen, while Wachtell Lipton Rosen & Katz is legal adviser to the company.