Shares of Contango Oil & Gas Co. rallied 5.0% in premarket trading Tuesday, after the oil and gas company announced an agreement to combine with KKR & Co. Inc.’s Independence Energy LLC in a stock deal that values the combined company at about $4.8 billion. KKR shares gained 1.2% ahead of the open. Under terms of the deal, Independence will merger with an operating subsidiary of a new parent company, which will become publicly traded, and Contango will become a wholly owned subsidiary of that operating company. The deal is expected to be “highly accretive” to financials, including adding about 15% to Contango’s cash flow per share in 2021 and adding 50% to 2022 cash flow per share. Synergies are estimate3d to be more than $20 million. KKR Energy Real Assets head David Rockecharlie will be chief executive of the combined company, and Contango Chairman John Goff will be chairman of the combined company. Contango’s stock has soared 145.4% year to date through Monday, while KKR shares have climbed 33.7% and the S&P 500 has advanced 12.5%.
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