Why APA & Callon Petroleum Shares Are Moving In Opposite Direction On Merger Deal
Portfolio Pulse from Lekha Gupta
APA Corp (NASDAQ:APA) is set to acquire Callon Petroleum Company (NYSE:CPE) in an all-stock deal valued at $4.5 billion, including CPE's debt. The deal terms state that each CPE share will be exchanged for 1.0425 APA shares, with an implied value of $38.31 per CPE share. Post-merger, APA shareholders will own approximately 81% and CPE shareholders 19% of the combined entity. The merger is expected to close in Q2 2024, subject to customary conditions. APA plans to retire CPE's debt and replace it with $2 billion in term loan facilities. The acquisition is anticipated to be accretive to APA's financial metrics, increase production, and provide operational synergies exceeding $150 million annually. APA shares dropped 4.35% while CPE shares rose 6.39% in premarket trading following the announcement.
January 04, 2024 | 2:02 pm
News sentiment analysis
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NEGATIVE IMPACT
APA Corp's shares fell 4.35% premarket after announcing the acquisition of CPE. The deal is expected to be accretive to APA's financials and increase production, but the initial market reaction is negative, likely due to concerns over the cost and integration risks.
The short-term negative impact on APA's stock price is likely due to investor concerns about the costs associated with the acquisition and the challenges of integrating CPE's operations. Despite the long-term accretive nature of the deal, short-term sentiment is cautious.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 100
POSITIVE IMPACT
Callon Petroleum's shares increased by 6.39% premarket following the merger announcement with APA. The terms of the deal provide a premium to CPE shareholders based on the current stock price, which is likely driving the positive reaction.
CPE's stock price is rising in the short term as the merger terms offer a premium to shareholders, which is a common occurrence when a company is acquired. The market is responding favorably to the immediate value unlocked for CPE shareholders.
CONFIDENCE 75
IMPORTANCE 80
RELEVANCE 100