Chevron to buy Anadarko Petroleum in $33bn deal
By Michele Maatouk
Date: Friday 12 Apr 2019
(Sharecast News) - Chevron has agreed to buy Anadarko Petroleum in a $33bn cash and stock deal.
Under the terms of the agreement, Anadarko shareholders will receive 0.3869 Chevron shares and $16.25 in cash for each of their shares.
Chevron said on Friday that the deal will significantly enhance its upstream portfolio and further strengthen its leading positions in large, attractive shale, deepwater and natural gas resource basins.
The transaction, which has been approved by the boards of directors of both companies, is expected to close in the second half of the year. Chevron said it delivers $2bn in anticipated annual operating cost and capital synergies and will be accretive to free cash flow and earnings one year after close.
Chairman and chief executive officer Michael Wirth said: "The combination of Anadarko's premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business. It creates attractive growth opportunities in areas that play to Chevron's operational strengths and underscores our commitment to short-cycle, higher-return investments.
"This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close."
Anadarko CEO Al Walker said: "The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities. I have tremendous respect for Mike and his leadership team and believe Chevron's strategy, scale and operational capabilities will further accelerate the value of Anadarko's assets."
According to CNBC, Occidental Petroleum bid more than $70 a share for Anadarko in cash and stock earlier but the company ultimately decided to go with Chevron.
CNBC cited sources as saying that the Occidental bid contained more cash than the Chevron offer and would have required a shareholder vote. Occidental was said to be considering its options.
According to Refinitiv, Chevron's acquisition of Anadarko pushes the Energy & Power target M&A to the highest year-to-date level on record, up 5.2% from YTD last year to $201.8bn.
At 1445 BST, Anadarko shares were up 32% at $62.01 and Chevron was down 5.4% at $119.18.
RBC Capital Markets analyst Biraj Borkhataria said: "Chevron has targeted a total of $2bn a year in synergies ($1bn opex and $1bn capex), however we see this as likely conservative as with prior deals in the space. Using the deal size as a rough rule of thumb, we would expect synergies to move up to more than $4-5bn as the portfolios get rationalised and priorities are clarified.
"This is also subject to the success of Chevron's asset sales programme, which has now been upgraded from $5-10bn over 2018-20, to $15-20bn over 2020-22. Looking through the lens of assets with limited growth potential, those that are more mature in nature and could be a better fit for others - we think Chevron could divest assets in Canada, Colombia, Azerbaijan and select parts of its Asian portfolio."
He added: "We have written extensively about our caution on Chevron relative to peers, noting that we thought its growth options outside of the Permian were weaker than peers. While this transaction does not necessarily add to the diversity of growth options (outside of Mozambique), it does add depth to Chevron's core areas of focus, and we suspect there is material high-grading of the portfolio to come."
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