US/Europe Event-Driven Analyst

John DeMasi

Event-Driven

<a href="https://www.smartkarma.com/entities/11091" target="_blank" data-smartkarma-citation="entities:11091:1">Chevron Corp (CVX US)</a> and <a href="https://www.smartkarma.com/entities/5048" target="_blank" data-smartkarma-citation="entities:5048:1">Anadarko Petroleum (APC US)</a>  <a href="https://chevroncorp.gcs-web.com/static-files/49922d8c-51e9-4c21-9c5e-d4c9af41901b" target="_blank">announced</a> a definitive agreement on April 12, 2019 whereby CVX will acquire APC for $33 billion in a stock and cash deal with a headline value of $65 per share and an APC total enterprise valuation of $50 billion (including APC’s $2+ billion of minority interests on the balance sheet). This represents a nearly 39% premium to APC’s closing price on April 11th of $46.80, and a 47% premium to APC’s 30 trading day average close through April 11th.
Merger consideration consists of 0.3869 shares of CVX and $16.25 in cash. CVX will issue 200 million shares and pay $8 billion in cash, in addition to assuming APC’s $15 billion of net debt. The companies anticipate annual synergies of about $2 billion (“run-rate cost synergies of $1 billion before tax, plus capital spending reductions of $1 billion within a year of closing”) and expect the deal to be accretive to free cash flow and earnings one year after completion.
Below I dive into the details from the perspective of a merger arbitrageur evaluating the deal as a potential portfolio position.

Chevron Corp (CVX US) and Anadarko Petroleum (APC US)  announced a definitive agreement on April 12, 2019 whereby CVX will acquire APC for $33 billion in a stock and cash deal with a headline value of $65 per share and an APC total enterprise valuation of $50 billion (including APC’s $2+ billion of minority interests on the balance sheet). This represents a nearly 39% premium to APC’s closing price on April 11th of $46.80, and a 47% premium to APC’s 30 trading day average close through April 11th.
Merger consideration consists of 0.3869 shares of CVX and $16.25 in cash. CVX will issue 200 million shares and pay $8 billion in cash, in addition to assuming APC’s $15 billion of net debt. The companies anticipate annual synergies of about $2 billion (“run-rate cost synergies of $1 billion before tax, plus capital spending reductions of $1 billion within a year of closing”) and expect the deal to be accretive to free cash flow and earnings one year after completion.
Below I dive into the details from the perspective of a merger arbitrageur evaluating the deal as a potential portfolio position.

Chevron Acquisition of Anadarko Petroleum – E&P Tempers Flare

United States

SPDR S&P Oil & Gas Exploration & Production ETF is an exchange-traded fund incorporated in the USA. The Fund's objective is to replicate as closely as possible the S&P Oil & Gas Exploration & Production Select Industry Index, an equal-weighted index.

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SPDR S&P Oil & Gas Exploration (XOP US)

Chevron Acquisition of Anadarko Petroleum – E&P Tempers Flare

Chevron Corp (CVX US) and Anadarko Petroleum (APC US) announced a definitive agreement on April 12, 2019 whereby CVX will acquire APC for $33...

John DeMasi

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