Wachtell Lipton Rosen & Katz is advising US oil producer APA on its acquisition of rival Callon Petroleum, advised by Kirkland & Ellis, in an all-stock transaction valued at $4.5bn including debt.  

The deal continues a run of major transactions in the energy sector, which hit record levels last year despite the sharp slowdown in overall M&A, as businesses take advantage of high share prices to launch all-stock acquisitions.  

APA noted that Callon’s assets would provide additional scale to its operations across the Permian Basin of West Texas and New Mexico – the focus of much of the deal activity – particularly in the Delaware Basin, where Callon has nearly 120,000 acres.  

The Wachtell team advising APA was led by corporate partners Daniel Neff and Zachary Podolsky. Other partners on the team included Erica Bonnett (executive compensation and benefits), Emily Johnson (finance), Nelson Fitts (antitrust) and tax lawyer T Eiko Stange. 

Meantime Kirkland’s team was led by corporate partners Sean Wheeler, Debbie Yee, Camille Walker and James Long; executive compensation partner Rob Fowler; debt finance partner Mary Kogut; capital markets partner Michael Rigdon; and tax partners David Wheat and Joe Tobias. 

The instruction provides Kirkland with a strong start to 2024, the Chicago-based giant having topped LSEG’s 2023 global M&A legal advisor ranking by deal value. It worked on 649 deals worth $399.4bn in a year when the value of global M&A activity fell to a 10-year low of $2.9trn. Wachtell was placed fifth in the ranking, working on 84 deals worth just over $310bn.    

Callon’s shares were up slightly on news of the deal but APA’s were trading down 6.6%, Reuters reported, reflecting investor concern over limited synergies and how much quality drilling acreage was being acquired.  

However both Callon and APA said their boards had unanimously approved the deal, which is expected to close in the second quarter. Under the terms of the transaction each share of Callon will be exchanged for 1.0425 shares of APA, which values each Callon share at $38.31. 

After closing, existing APA shareholders will own around 81% of the combined company and Callon shareholders are expected to own around 19%.  

News of the deal follows three blockbuster acquisitions last year that helped energy and power overtake technology to become the top sector by M&A deal value in 2023. The largest was ExxonMobil’s $65bn acquisition of rival Pioneer Natural Resources, which proved to be the year’s biggest M&A deal overall. Davis Polk and Gibson Dunn were called in to advise the respective parties. 

Paul Weiss-repped Chevron’s $60bn acquisition of smaller rival Hess was the second biggest deal globally; Hess was advised on the matter by Wachtell.    

And late in the year Occidental Petroleum, advised by Latham & Watkins, agreed to acquire Vinson & Elkins-repped CrownRock for $10.8bn.

APA’s financial advisers on the deal are Citi and Wells Fargo Securities. Morgan Stanley is acting as Callon’s lead adviser, while RBC Capital Markets is the company’s financial adviser.