Woodside set to acquire BHP Petroleum in share sale agreement

BHP Group and Woodside Petroleum have signed a binding share sale agreement for the merger of BHP’s oil and gas portfolio with Woodside. Woodside will acquire the entire share capital of BHP Petroleum International (BHP Petroleum) in exchange for new Woodside shares.

The signing of the share sale agreement follows the merger commitment deed announced on 17 August 2021. On completion, the merger will create a global top 10 independent energy company by production and the largest energy company listed on the Australian Security Exchange (ASX). The combined company will have a high margin oil portfolio, long life LNG assets and the financial resilience to help supply the energy needed for global growth and development over the energy transition.

BHP CEO Mike Henry said the merger will create value for BHP shareholders: “Merging our petroleum business with Woodside creates a large, more resilient company, better able to navigate the energy transition and grow value while doing so.”

On completion of the merger, Woodside will issue new shares expected to comprise approximately 48% of all Woodside shares (on a post-issue basis) as consideration for the acquisition of BHP Petroleum. The merger ratio is based on the number of Woodside shares at the effective date. The number of new shares issued on completion will be adjusted to reflect shares issued by Woodside under its dividend reinvestment plan after the effective date.

The new Woodside shares will be distributed to BHP shareholders as an in-specie fully franked dividend.

Completion is targeted for Q2 2022. Prior to completion, BHP and Woodside will carry on their respective businesses in the normal course and, will put in place appropriate plans to enable a smooth transition of ownership.

The effective date of the merger will be 1 July 2021.

On completion, Woodside will make a cash payment to BHP in relation to cash dividends paid by Woodside between the effective date and completion. BHP will make a cash payment to Woodside for the net cash flow generated by BHP Petroleum between the effective date and completion (or, if that amount is negative, Woodside will make a cash payment to BHP). Where applicable, these amounts will be netted off.

BHP Petroleum will transfer to Woodside on a cash and debt-free basis, based on the balance sheet at the effective date, subject to certain exclusions including legacy assets and liabilities that will remain with BHP. In its Financial Report for the half year ending 31 December 2021, BHP expects to present the results of BHP Petroleum as a discontinued operation and the BHP Petroleum balance sheet as held for sale, subject to the status of the Merger’s conditions precedent outlined below.

BHP has agreed to exclusivity arrangements with Woodside. These arrangements do not restrict BHP from considering superior proposals for BHP Petroleum in prescribed circumstances. Woodside has agreed to similar exclusivity arrangements in connection with a competing proposal for Woodside.

Each party has given the other party certain warranties regarding its business. Woodside has agreed to indemnify BHP for, among other things and subject to certain limitations, decommissioning and environmental liabilities relating to the BHP Petroleum business. BHP has agreed to indemnify Woodside for, among other things and subject to certain limitations, claims in respect of entities and assets not forming part of the Merger.

BHP and Woodside have termination rights (including if the other is subject to a defined material adverse change or specified petroleum reserve reduction) and BHP has a right to terminate upon certain changes to Woodside’s credit rating. Each party has agreed that, if the merger does not complete, its only recourse is a reimbursement fee of US$160 million payable in certain circumstances, including if Woodside’s board changes, withdraws or qualifies its recommendation that shareholders vote in favor of the Merger (subject to certain exceptions).

Completion of the merger is subject to satisfaction (or waiver where permitted) of conditions precedent by 30 June 2022 or an agreed later date which include:

• approval by certain regulatory and competition authorities;
• approval by Woodside shareholders at a general meeting;
• independent experts appointed by Woodside issuing a report concluding that the merger is in the best interests of Woodside shareholders;
• certain registration statements relating to Woodside shares being declared effective by the US Securities and Exchange Commission (SEC); and
• other conditions customary for a transaction of this nature

If a condition precedent has not been satisfied or waived by 30 June 2022 (or an agreed later date) either party may terminate the SSA.

In addition, BHP and Woodside are actively seeking necessary third-party consents resulting from the Merger and are working to secure these consents prior to Woodside shareholders voting to approve the Merger.

The Woodside shareholder meeting to approve the merger is targeted for Q2 2022.