Why Southwestern Energy Shares Are Down Today

Southwestern Energy Co SWN shares are trading lower after it announced a merger deal with Chesapeake Energy Corp CHK.

Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each share at closing. The all-stock transaction is valued at $7.4 billion, or $6.69 per share, based on Chesapeake's closing price on January 10, 2024.

At this exchange ratio and the respective share prices on January 10, 2024, the combined company would have an enterprise value of around $24 billion. 

Related: Southwestern Energy And Chesapeake Energy Near $17B Merger: Report

Post closure, shareholders of CHK will own about 60%, and SWN will own around 40% of the combined company.

The merger is projected to close in the second quarter of 2024 upon fulfillment of customary closing conditions and has been approved by the boards of directors of both companies. 

Nick Dell'Osso, Chesapeake's President and Chief Executive Officer, will serve as President and Chief Executive Officer of the combined company. 

With the merger, the pro forma company will have a current net production of around 7.9 Bcfe/d with more than 5,000 gross locations and 15 years of inventory.

The companies expect annual operational and overhead synergies of approximately $400 million from the merger, which is projected to be immediately accretive to all key per share financial metrics.

Through CHK's existing shareholder return framework, the combined company projects around 20% improvement in dividends per share over five years, led by significant synergies and greater pro forma free cash flow generation.

Nick Dell'Osso said, "This powerful combination redefines the natural gas producer, forming the first U.S. based independent that can truly compete on an international scale." 

"Together, Southwestern and Chesapeake can drive improved margins and returns from our highly complementary portfolios through enhanced scale, capital allocation flexibility, and access to premium markets to supply growing global natural gas demand," said Bill Way, SWN President and Chief Executive Officer.

Price Action: SWN shares are down 2.25% at $6.74, while CHK is up 3.27% at $79.70 on the last check Thursday.