Concho ratings, balance sheet won’t change post all-stock acquisition

By Devika Patel

Knoxville, Tenn., March 28 – Concho Resources Inc. said it will maintain the same investment-grade credit ratings and target leverage ratio range after it acquires RSP Permian, Inc. in an all-stock transaction.

The acquisition is valued at approximately $9.5 billion, inclusive of RSP’s net debt.

Under the agreement, shareholders of RSP will receive 0.320 Concho common shares in exchange for each RSP common share, representing a consideration of $50.24 per share. The consideration represents a 29.09% premium to RSP’s closing share price of $38.92 on March 27.

“We have agreed to acquire RSP in an all-stock transaction for $8 billion plus the assumption of $1.5 billion of net debt,” chairman and chief executive officer Tim Leach said on the company’s conference call announcing the acquisition on Wednesday.

Concho expects to maintain investment-grade credit ratings and will maintain its balance sheet and leverage ratio targets.

“We view this deal as credit positive and we believe the ratings agencies do as well,” president and chief financial officer Jack Harper said on the call.

“Following this transaction, we expect to maintain our strong balance sheet with our leverage ratio in our comfort range of 1x to 1.5x,” Leach said.

The transaction is expected to be completed in the third quarter of 2018.

Concho is a Midland, Texas, oil and natural gas company focused on the Permian basin in southeast New Mexico and west Texas.

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