Kirkland, Latham advise on Chesapeake’s $7.4bn deal for Southwestern

Top M&A firms instructed on latest multibillion-dollar energy industry deal, with Wachtell Lipton also called in

Latham & Watkins and Wachtell Lipton Rosen & Katz are advising Chesapeake Energy on its $7.4bn acquisition of smaller rival Southwestern, which is being counselled by Kirkland & Ellis. 

The all-stock transaction will see Oklahoma City-headquartered Chesapeake become the largest independent US natural gas producer. 

“The world is short energy and demand for our products is growing, both in the US and overseas,” said Chesapeake CEO, Nick Dell’Osso, who will lead the combined company. “We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fuelling a more affordable, reliable and lower carbon future.”

The Kirkland team advising Southwestern was led by corporate partners Doug Bacon, Kim Hicks and Pat Salvo; debt finance partners Will Bos, Rachael Lichman and Chad Davis; capital markets partners Julian Seiguer and Anne Peetz; tax partners David Wheat and Bill Dong; executive compensation partners Rob Fowler and Stephanie Jeane; and antitrust and competition partners Jim Mutchnik and Chuck Boyars.

Meantime the Latham team that represented Chesapeake Energy was led by Houston-based corporate partners Kevin Richardson, Bill Finnegan and Ryan Lynch. It also included partners Tim Fenn and Jim Cole (both tax); Craig Kornreich and Pamela Kellet and Yvette Valdez (all finance); Adam Kestenbaum (benefits); Joshua Marnitz (environmental); Michael King (oil and gas); Samuel Rettew (capital markets); Jason Cruise (antitrust). Counsel Robert Brown also advised on data privacy matters. 

Wachtell said its team was led by New York corporate partner David Katz.  

Kirkland – the largest law firm in the world by revenue – beat Latham to become the top legal advisor for M&A deals globally in 2023, when it worked on deals worth a total of $399.3bn. Second-placed Latham worked on deals worth $385.4bn, while Wachtell ($310.3bn) rose four places to fifth. 

The Southwestern acquisition is the latest in a string of multibillion-dollar deals in the energy industry, which overtook technology to become the top sector by M&A deal value in 2023. 

Deal making in the sector totalled $502.3bn over the course of 2023, fuelled by two mega mergers that proved to be the biggest deals overall in 2023. ExxonMobil’s $65bn acquisition of rival Pioneer Natural Resources claimed the top spot; Davis Polk and Gibson Dunn were called in to advise the respective parties. Paul Weiss-repped Chevron’s $60bn acquisition of smaller rival Hess came in second. Hess was advised on the matter by Wachtell.  

Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each outstanding share of Southwestern common stock at closing. Reuters reported that Chesapeake’s offer of $6.69 per Southwestern share represented a discount of around 3% on the stock’s last close. 

The boards of both companies have approved the deal, which is expected to close in the second quarter. Following the acquisition Chesapeake shareholders will own about 60% of the combined company and Southwestern shareholders will own the rest.

Evercore is serving as lead financial advisor and JP Morgan Securities is acting as financial advisor to Chesapeake. 

Meantime Goldman Sachs is serving as lead financial advisor to Southwestern, while RBC Capital Markets, BofA Securities and Wells Fargo Securities are acting as as financial advisors. 

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