Chevron Corp. has entered into a definitive agreement with Anadarko Petroleum Corp. to acquire all the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion.
The acquisition consideration is structured as 75percent 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 about $8 billion in cash. It will also assume 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.
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. The acquisition is subject to Anadarko shareholder approval, regulatory approvals, and other customary closing conditions.
Upon closing, the company will continue be led by Michael Wirth as chairman and CEO and will remain headquartered in San Ramon, California.
Wirth said: “This transaction builds strength on strength for Chevron. 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.”
Anadarko Chairman and 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 Chevron, Anadarko’s assets will enhance its portfolio across a diverse set of asset classes, including shale, deepwater and LNG
In addition, the transaction is expected to achieve run-rate cost synergies of $1 billion before tax and capital spending reductions of $1 billion within a year of closing. The company said it expects the transaction to be accretive to free cash flow and earnings per share one year after closing, at $60 Brent.
Chevron said it 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, the company said it plans to increase its share repurchase rate from $4 billion to $5 billion per year upon closing the transaction.