US energy giant Chevron said on Friday it plans to acquire US independent oil and gas producer and Mozambique LNG developer, Anadarko Petroleum, in a cash and stock deal valued at $33 billion.
Chevron said on Friday that a definitive agreement with Anadarko Petroleum was for the acquisition of all outstanding shares for a value of $65 per share.
Based on Chevron’s closing price on April 11, 2019, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. The total enterprise value of the transaction is $50 billion.
Chevron’s chairman and CEO 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 chairman and CEO Al Walker added: “The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people, and opportunities.”
Anadarko a strong strategic fit
Chevron said that the benefits of acquiring Anadarko included the fact that Anadarko’s assets will enhance Chevron’s portfolio across a diverse set of asset classes, including shale & tight, deepwater, and LNG.
The first two categories will extend Chevron’s position as a producer in the Permian as well as enhance Chevron’s existing high-margin position in the deepwater Gulf of Mexico and improve its deepwater infrastructure network.
As for LNG, Chevron will gain a world-class resource base in Mozambique. Area 1 is a very cost-competitive and well-prepared greenfield project close to major markets.
It is also worth noting that Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022. The proceeds will be used to further reduce debt and return additional cash to shareholders.
As a result of higher expected free cash flow gained through the acquisition of Anadarko, Chevron plans to increase its share repurchase rate from $4 billion to $5 billion per year upon closing the transaction.
The acquisition consideration is structured as 75 percent stock and 25 percent cash, providing an overall value of $65 per share based on the closing price of Chevron stock on April 11, 2019.
In aggregate, upon closing of the transaction, Chevron will issue approximately 200 million shares of stock and pay approximately $8 billion in cash. Chevron will also assume an estimated net debt of $15 billion.
Total enterprise value of $50 billion includes the assumption of net debt and book value of non-controlling interest.
Chevron said that the transaction has been approved by the boards of directors of both companies and is expected to close in the second half of the year and subject to Anadarko shareholder approval and other regulatory approvals.
Upon closing, the company will continue to be led by Michael Wirth as chairman and CEO. Chevron will remain headquartered in San Ramon, California