Deal to create one of the largest independent U.S. oil producers
Combined co to hold about 823,000 net acres across top U.S. shale basins
SM shares down 5.7%
Analysts surprised at 5% premium for Civitas shareholders
Updates shares and adds analyst quotes in paragraphs 5 to 7
By Pooja Menon and Sumit Saha
Nov 3 - SM Energy SM.N and Civitas Resources CIVI.N said on Monday they will merge in a $12.8 billion deal, including debt, to create one of the largest independent U.S. oil producers with a commanding footprint in the Permian Basin.
U.S. shale producers are increasingly turning to mergers, with analysts saying investors favor disciplined spending and steady shareholder returns over rapid growth in an uncertain oil market.
Civitas shareholders will get 1.45 shares of SM Energy for each Civitas share, giving them about 52% ownership of the combined company.
The offer values Civitas at $30.29 per share, about a 5% premium to its closing price on October 31, for an equity value of $2.81 billion, according to Reuters calculations.
Shares of SM fell nearly 6% in morning trading, while Civitas slipped slightly.
Analysts said SM shareholders were caught off guard by the premium, especially after reports suggested the tie-up could come as a no-premium merger.
"We were surprised by the relative premium that CIVI shares received," said RBC Capital Markets analyst Scott Hanold, citing Civitas' higher leverage and less concentrated acreage.
The combined company will hold about 823,000 net acres across top U.S. shale basins, including Permian and Denver-Julesburg (DJ), and is expected to generate over $1.4 billion in free cash flow this year.
The merged firm will keep the SM Energy name and ticker, and be headquartered in Denver and the deal is expected to close in the first quarter of 2026.
SM Energy expects to save about $200 million annually, and potentially up to $300 million, through lower overhead and operating costs. The company plans to prioritize free cash flow to cut debt and to maintain its quarterly dividend of 20 cents per share.
SM Energy CEO Herb Vogel will lead the combined company. Its 11-member board will include six directors from SM and five from Civitas.
(Reporting by Pooja Menon, Sumit Saha and Pranav Mathur in Bengaluru; Editing by Sahal Muhammed and Krishna Chandra Eluri)
((Sumit.Saha@thomsonreuters.com; Pooja.Menon@thomsonreuters.com;))