ConocoPhillips (COP) announced Wednesday that it had agreed to buy Marathon Oil (MRO) in an all-stock transaction valued at $22.5 billion, including $5.4 billion in debt. Marathon Oil stock jumped early while COP stock fell.
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Marathon Oil shareholders will receive 0.2,550 COP shares for each MRO share. That represents a 14.7% premium over Marathon Oil’s Tuesday closing price of 26.45 and a 16% premium over the volume-weighted average price over the previous 10 days. ConocoPhillips and Marathon Oil expect the deal to close in the fourth quarter.
The deal will strengthen Conoco’s shale assets.
“This acquisition of Marathon Oil further deepens our portfolio and fits our financial framework, adding high-quality, low-cost supply inventory adjacent to our leading position in the unconventional sector in the United States” , ConocoPhillips CEO Ryan Lance said in the press release on Wednesday.
ConocoPhillips added Wednesday that it remains focused on returning cash to shareholders. The company said it plans to increase its basic ordinary dividend 34% to 78 cents per share in the fourth quarter. COP added that when the Marathon Oil deal closes, it plans to repurchase more than $7 billion of shares in the first full year, up from $5 billion, and repurchase more than $20 billion of dollars of shares during the first three years.
Marathon Oil stock jumped 7.3% during pre-market action Wednesday. Meanwhile, ConocoPhillips stock fell 3.1%.
On Tuesday, MRO shares advanced 3.5% to 26.45 and COP gained 1.5% to 118.96.
ConocoPhillips is among major U.S. oil producers now looking to increase production through industry consolidation. Exxon Mobile (XOM) And Chevron (CLC) have led the way, both recently ramping up their acquisition efforts.
The Financial Times reported before the deal that ConocoPhillips and its rival Devon Energy (DVN) had been fighting for several weeks to acquire Marathon Oil.
Please follow Kit Norton on @KitNorton for more coverage.
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