Chevron Raises the Stakes With Purchase of Anadarko Petroleum

Chevron Corporation (NYSE:CVX) has agreed to purchase Anadarko Petroleum Corporation (NYSE:APC), in a hybrid cash and stock deal that valued at roughly $35 billion. That’s nearly a 40% premium to Anadarko’s closing price on Thursday.

“This transaction builds strength on strength for Chevron,” said Chevron’s Chairman and CEO Michael Wirth. “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.”

Anadarko, with its’ diversified global reach including natural gas, fracking and deep water drilling, has been long rumored as an acquisition target, although such talk became much less pervasive after the sharp decline in oil prices in 2015 and the resulting global malaise in in commodity and natural resource pricing.

“The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Anadarko Chairman and CEO Al Walker. “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.”

Chevron, the second largest U. S.-based multinational energy company, and member of the Dow Jones Industrial Average (^DJI), will pay Anadarko shareholders 0.3869 shares of Chevron stock and $16.25 for each share of stock in Anadarko Petroleum.

To complete the transaction, Chevron will increase their shares outstanding roughly +10% by issuing 200 million new shares, and pay close to $8 billion in cash.

Upon completion of the acquisition, Chevron expects to strengthen its competitive position in three areas critical for future growth in the international energy 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,” Mr. Wirth added. “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.”