Bloomberg Businessweek - USA (2020-08-03)

60

ILLUSTRATION

BY

GEORGE

WYLESOL

Thesmaller takeoverisusuallythe

smarterone,especiallyintheembat-

tledoilandgasindustry.

ChevronCorp.announcedonJuly 20

thatit wasacquiringNobleEnergyInc.

forabout$5billion.It wasthefirst

majortakeoverlaunchedinthesec-

torsincethecoronaviruspandemic

triggereda severeerosionindemand

andunprecedentedvolatilityincrude

prices.Thedealvalueswellstoabout

$13billiononceNoble’s$8billionorso

innetdebtis included.

That’s a farcryfromthe$50 billionpurchaseof

AnadarkoPetroleumCorp.thatChevronpursuedlastyear.

Chevronultimatelywalkedawayandcededthetakeover

toOccidentalPetroleumCorp.Nobleis a moredigestible

versionofAnadarkoandbringsChevroncomplemen-

taryassetsinthePermianBasin,a keyU.S.shalepatch.

ChevronwillalsoaddacreageintheDenver-Julesburg

BasinofColoradoandtheEasternMediterranean.

Perhapsmostimportantforinvestors,Chevronis buy-

ingNobleonthecheap.It’soffering0.1191sharesforeach

shareofNoble,whichworksouttoabout$10.38,based

ontradingvaluesleadinguptothedeal’sannouncement.

That’swellbelowbothNoble’spre-pandemicvaluation

andthe$14analystsonaveragehavebeenexpectingthe

stocktoreachoverthenextyear.

Alltold,thepurchasewillmakea fairlyminordentin

Chevron’srobustbalancesheet.Occidental,bycontrast,

hadtorelyonexpensivefinancingfromWarrenBuffett

◼ LAST THING

With Bloomberg Opinion

By Brooke Sutherland

The Jackpot

Of a Smaller Deal

to outbid Chevron. Buffett’s cash also

allowed Occidental to keep the stock

component of its Anadarko bid below

the threshold that would have trig-

gered a shareholder vote, much to the

chagrin of investors who were hoping

to derail a deal they saw as irrespon-

sible. Occidental is now saddled with

debt and under increasing pressure to

prove the Anadarko takeover can still

pay off in a depressed oil environment.

The company’s shares are down about

60% this year, which is one of the worst

performances on the S&P 500 Energy index. Chevron’s

stock has declined a comparably moderate 25%. 

On a call to discuss the Chevron deal, Noble Chief

Executive Officer Dave Stover said the company had

reviewed other merger possibilities. That Noble sold

itself at such a bargain price suggests there wasn’t a lot

of competition. Not many oil and gas companies have

the financial wherewithal to even consider major acqui-

sitions right now. Royal Dutch Shell Plc cut its dividend

for the first time since World War II earlier this year, and

analysts have speculated BP Plc may follow suit. Stover

highlighted the appeal of Chevron’s stock as an “attrac-

tive currency” and the opportunity for Noble sharehold-

ers to benefit from its dividend, but other possible sellers

may prefer to ride out the oil rout for as long as they

can in the hopes of higher prices and more buyers. <BW>

�Sutherland writes about mergers and industrial com­

panies for Bloomberg Opinion

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