Amerada Hess Corp., New York City, said Monday it will acquire London-based Lasmo PLC in a stock and cash transaction valued at $3.5 billion, a deal it said would make it one of the world's largest independent exploration and production companies.
Amerada Hess will issue 17.1 million shares of common stock and pay $2.4 billion in cash for Lasmo. The transaction also includes the assumption of $1.6 billion of Lasmo's debt.
The merger will increase Amerada Hess' production to an expected 582,000 boe/d in 2001, up from 374,000 boe/d in 2000. Amerada Hess said it will gain reserves at $5.49/boe.
John Hess, chairman of Amerada Hess, said the acquisition of Lasmo also strengthens Amerada Hess' international reserve portfolio and extends its production profile.
"It enhances our competitive position in a consolidating industry while being accretive to our estimates of our earnings and cash flow per share for 2001," said Hess.
The acquisition of Lasmo, a pure E&P company, also will create a more balanced investment portfolio due to the complementary nature of their assets, cash flows and investment opportunities, a company statement said. Amerada Hess anticipates significant synergies, given the significant geographical overlap of the companies' assets.
E&P is expected to represent 76% of average capital employed by Amerada Hess by year end 2001 on a pro-forma basis, compared with 59% for Amerada Hess for year-end 2000 on a stand-alone basis.
The deal also would help Amerada Hess achieve its goal of increasing reserves outside the US and the North Sea. International proved and probable reserves will be 41% on a pro-forma basis, vs. 16% at year-end 1999.
It will also enhance Amerada Hess' production growth to 6% post-acquisition on a compound annual basis through 2004 from 5% pre-acquisition, while significantly extending its reserve life 14-16 years, including proved and probable reserves.
Lasmo's directors unanimously recommended the sale. The deal must be accepted by at least 90% of Lasmo's stockholders.
The offer represents a 28% premium to the mid-market closing price of a Lasmo share at the close of business on Nov. 3, the last trading day on the London Stock Exchange prior to the deal's announcement.
Lasmo also agreed to pay Amerada Hess 24 million pounds if the offer lapses or is withdrawn.
