Kimmeridge Withdraws Latest KTG-SilverBow Merger Proposal

Asset manager Kimmeridge has withdrawn its latest proposal to SilverBow Resources’ board to merge it with Kimmeridge Texas Gas (KTG) after a “lack of engagement” on the board’s part.

Kimmeridge said in a statement it delivered a “financed, premium proposal” to combine KTG and SilverBow with an associated $500 million equity investment, at the latter’s invitation. The combination would have created a preeminent pure-play Eagle Ford shale operator with an estimated enterprise value of approximately $3.6 billion, it noted.

Kimmeridge said it had asked the board to provide a clear view of SilverBow's relative value and the terms under which they would be willing to transact.

“Based on public statements made by the company, the board has such valuation information on hand, yet the company has not responded. It appears that SilverBow is not willing to seriously engage in any discussions of mergers in which it would be the smaller party. Instead, the Board and management team are focused on maintaining their positions and compensation,” Kimmeridge said in the statement.

“Given SilverBow's lack of engagement, Kimmeridge sees no pathway towards a transaction by the April 26, 2024 deadline that we had put forward more than a month ago,” the asset manager continued.

“As a result, we are withdrawing the proposal and will be focused on providing solutions for SilverBow's broken governance. The only way SilverBow will maximize value for all shareholders and reach its long-term potential is by introducing new, independent, and experienced perspectives to the board,” it stated.

Kimmeridge said that it would instead encourage SilverBow shareholders to elect its three independent, highly-qualified nominees to the board in the upcoming SilverBow annual meeting of shareholders on May 21, adding that the nominees are “committed to conducting a thorough and unbiased evaluation of all potential paths to value creation”.

The board of SilverBow had previously turned down another merger proposal earlier in the month from Kimmeridge, saying that the proposal “substantially undervalues SilverBow”.

In a letter sent to shareholders last week, SilverBow’s board once again urged that they vote for the three directors it nominated. It said it is still “open to exploring transactions with KTG at appropriate valuations”.

Kimmeridge, which holds 12.9 percent of SilverBow’s outstanding shares, noted that the KTG assets have an equity value of $1.1 billion and an expected enterprise value of $1.4 billion at closing of the proposed transaction.

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