BHP and Woodside agree to create a global energy company
The combined company will have a high margin oil portfolio, long life LNG assets and the financial resilience
BHP Group (BHP) and Woodside Petroleum Ltd (Woodside) have today signed a binding share sale agreement (SSA) for the merger of BHP’s oil and gas portfolio with Woodside (Merger). Woodside will acquire the entire share capital of BHP Petroleum International Pty Ltd (BHP Petroleum) in exchange for new Woodside shares.
The signing of the SSA follows the merger commitment deed announced on 17 August 2021.
On completion, the Merger will create a global top 10 independent energy company by production and the largest energy company listed on the ASX. The combined company will have a high margin oil portfolio, long life LNG assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.
BHP CEO Mike Henry said BHP’s petroleum business and Woodside are better together and will create value for BHP shareholders. He said:
“Merging our petroleum business with Woodside creates a large, more resilient company, better able to navigate the energy transition and grow value while doing so. Through the merger we will provide value and choice for BHP shareholders, and unlock synergies in how these assets are managed.”
An alternative option carefully considered by the Board was to implement a demerger through a distribution to shareholders of shares in a newly listed entity. However, while a demerger would result in a strong and financially viable stand-alone entity, the Board determined that the Merger was the best alternative for shareholders given that it would capture the additional value flowing from the advantages and benefits outlined above.
On completion of the Merger, Woodside will issue new shares expected to comprise approximately 48% of all Woodside shares (on a post-issue basis) as consideration for the acquisition of BHP Petroleum. The Merger ratio is based on the number of Woodside shares at the effective date. The number of new shares issued on completion will be adjusted to reflect shares issued by Woodside under its dividend reinvestment plan after the effective date.
Completion is targeted for the second quarter of the 2022 calendar year. Prior to completion, BHP and Woodside will carry on their respective businesses in the normal course and, will put in place appropriate plans to enable a smooth transition of ownership.
The effective date of the Merger will be 1 July 2021.
On completion, Woodside will make a cash payment to BHP in relation to cash dividends paid by Woodside between the effective date and completion. BHP will make a cash payment to Woodside for the net cash flow generated by BHP Petroleum between the effective date and completion (or, if that amount is negative, Woodside will make a cash payment to BHP). Where applicable, these amounts will be netted off.
BHP Petroleum will transfer to Woodside on a cash and debt-free basis, based on the balance sheet at the effective date, subject to certain exclusions including legacy assets and liabilities that will remain with BHP. In its Financial Report for the half year ending 31 December 2021, BHP expects to present the results of BHP Petroleum as a discontinued operation and the BHP Petroleum balance sheet as held for sale, subject to the status of the Merger’s conditions precedent outlined below.