SM Energy Co. (SM) announced Monday that it has entered into a definitive agreement with exploration and production company Civitas Resources, Inc. (CIVI) to merge in an all-stock transaction. The combined company's enterprise value would be around $12.8 billion,inclusive of each company's net debt.
In the pre-market activity, SM shares were gaining around 3.1 percent to trade at $21.55, and Civitas shares were gaining around 2.4 percent at $29.52.
The combination is expected to be immediately accretive to key per share financial metrics. These include operating cash flow, debt-adjusted cash flow, free cash flow, and net asset value.
The merger is expected to close in the first quarter of 2026, subject to customary closing conditions, including approvals by SM Energy and Civitas stockholders and regulatory clearances.
Under the deal terms, Civitas stockholders will receive 1.45 shares of SM Energy common stock at closing, and the merged company will continue to trade as SM Energy. SM Energy will issue approximately 126.3 million shares as consideration to Civitas shareholders.
Following the deal closure, SM Energy stockholders will own around 48 percent of the combined company, while Civitas stockholders will own the remaining around 52 percent stake on a fully diluted basis.
The combined company will have a premier portfolio of around 823,000 net acres, with the Permian position being the cornerstone.
The combined company is expected to deliver sustainable dividends, a program that SM Energy has grown on a per share basis by 33 percent since introduced in 2022.
Following the merger, the Board of Directors will total 11 members, comprising 6 representatives from SM Energy and 5 representatives from Civitas. Julio Quintana will serve as Non-Executive Chairman and Herb Vogel will serve as Chief Executive Officer. The combined company will be headquartered in Denver, Colorado.
The company added that the previously announced expected CEO transition to Beth McDonald remains on-track.
In the deal, Evercore is serving as financial advisor to SM Energy, and J.P. Morgan is serving as financial advisor to Civitas Resources.
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