Bouncing back

BY Richard Summerfield

M&A activity across a number of regions is expected to bounce back in the third quarter of 2019, according to the Q3 2019 issue of the Intralinks Deal Flow Predictor report.

The report forecasts the number of M&A announcements by tracking early-stage M&A activity, defined as new sell-side M&A transactions that are in preparation or have begun their due diligence stage. On average, early-stage deals are six months away from public announcement.

Undoubtedly, the year got off to a disappointing start. The worldwide number of announced M&A deals fell by 17 percent year-over-year in Q1 2019, according to Intralinks — the biggest such decline since 2002 and the sixth largest decline in any quarter for the past 30 years.

However, the outlook for Q3 appears to be much brighter. In North America, for example, M&A deals announced in Q1 2019 fell by 29 percent year-over-year. Yet looking forward, Intralinks’ predictive model anticipates that the number of announced M&A deals is expected to increase by around 3 percent year-on-year over the next six months. Europe, the Middle East and Africa are expected to see growth of around 1 percent. The strongest growth contributions are expected in the real estate, healthcare and technology, media and telecoms (TMT) sectors. France, Germany, Italy and Spain are expected to see the largest increase in M&A announcements.

The Asia-Pacific (APAC) region is forecast to see growth of around 4 percent. Within APAC, all regions except Southeast Asia and South Korea are demonstrating growth in their volumes of early-stage M&A activity. Looking forward, North Asia (China, Hong Kong), India, Japan and Australasia are expected to make the strongest contributions to APAC’s growth.

In Latin America, however, announced M&A deals are expected to fall by around 6 percent year-on-year. Any growth there is anticipated to occur in the materials, energy and power and TMT sectors. Brazil, Chile, Mexico and Peru, the largest economies in the Latin American region, are predicted to show year-on-year increases in M&A announcements.

The strongest growth in worldwide deal announcements is expected to come from the real estate, energy & power and financials sectors.

Report: Intralinks Deal Flow Predictor for Q3 2019

Occidental has the edge in potential Anadarko merger

BY Richard Summerfield

A merger between Anadarko Petroleum Corporation and Occidental Petroleum Corporation is inching closer as Anadarko announced that Occidental’s revised $38bn offer for the company constitutes a “superior proposal” to the company’s previously announced deal with Chevron Corporation.

Under the terms of the revised Occidental proposal, the company would acquire Anadarko for $76 per share, comprised of $59 in cash and 0.2934 of a share of Occidental common stock per share of Anadarko common stock. The revised Occidental offer represents a premium of approximately 23.3 percent to the $61.62 per share value of Chevron’s pending offer.

Occidental’s offer would also remove a requirement for any deal to receive the approval of Occidental’s shareholders. The cash element of Occidental’s bid has increased $18.8bn, a move which allows the company to avoid a vote by its shareholders on the deal. Some of the Occidental’s investors are opposed to the decision to bypass a shareholder vote of approval, however.

Chevron’s previously agreed merger, which was worth $33bn, is now in jeopardy. The company has until 10 May to revamp its own offer, or walk away from the deal. Chevron’s merger agreement with Anadarko is structured as 75 percent stock and 25 percent cash. Chevron has previously noted that it is not likely to engage in a bidding war for Anadarko, however. If Anadarko terminates the Chevron merger agreement, which it indicated it will do in a statement released on Monday, in order to enter into a definitive agreement with Occidental, Anadarko will pay Chevron a $1bn termination fee.

The decision is a victory for Occidental chief executive Vicki Hollub, who pressed Anadarko’s board to reject the Chevron agreement and pulled in support from billionaire Warren Buffett for the deal. Mr Buffett’s Berkshire Hathaway has pledged to invest $10bn into the deal.

“We firmly believe that Occidental is uniquely positioned to drive significant value and growth from Anadarko’s highly complementary asset portfolio,” said Ms Hollub. “This combination will create a global energy leader with the scale and geographic diversification to drive compelling returns to the shareholders of both companies. The financial support of Berkshire Hathaway as well as the agreement we announced with Total allows us to delever our balance sheet while focusing our integration efforts on the assets that will provide the most value for us.”

The battle for control of Anadarko has gone on for some time. In April, the company rebuffed an offer from Occidental and chose to favour Chevron’s lower bid.

News: Anadarko backs Occidental's revised bid, pressuring Chevron to respond

ConocoPhillips sells North Sea assets

BY Richard Summerfield

ConocoPhillips, has agreed to sell two UK subsidiaries to Chrysaor Holdings Limited for $2.7bn.

The assets being acquired produced approximately 72,000 BOE in 2018. This acquisition increases Chrysaor's pro forma 2018 production to 177,000 BOE, making it one of the largest oil and gas producers in the UK North Sea. The deal is expected to close in the second half of 2019, subject to regulatory approval and other closing conditions.

“We are extremely proud of the legacy we’ve built in the UK over the last 50 years and are pleased that Chrysaor recognises the value of this business,” said Ryan Lance, chairman and chief executive of ConocoPhillips. “This disposition is part of our ongoing effort to hone our portfolio and focus our investments across future low cost of supply opportunities.”

 “We are excited to play a role in the natural evolution of the North Sea and to enable the safe transfer of assets from major oil companies such as ConocoPhillips to new, well‐funded, privately‐owned operators,” said Linda Z. Cook, chairman of Chrysaor. “This process results in a good deal for both the seller and the buyer, with new asset owners such as Chrysaor bringing the strategy and capital required for reinvestment and growth. The outcome is a reinvigorated oil and gas sector, an extension of the producing life of existing fields and the maximisation of hydrocarbon resource recovery.”

The deal is the latest in a number of transactions which are reshaping the North Sea oil space. Chrysaor, which is backed by private equity firm EIG Global Partners, is already one of the biggest players in the region after acquiring assets from Royal Dutch Shell for $3.8bn in 2017. Chrysaor will fund the deal through existing cash resources and a debt facility underwritten by several banks – including the Bank of Montreal, BNP Paribas, DNB Bank and ING Bank. ConocoPhillips expects to use the proceeds from the sale for general corporate purposes.

News: Conoco sells UK North Sea oil assets to Chrysaor for $2.7 billion

Waste Management agrees Advanced Disposal deal

BY Richard Summerfield

American waste and environmental services company Waste Management has agreed to acquire smaller rival Advanced Disposal in a deal worth $4.9bn, including debt.

Waste Management will pay around $33.15 per share for Advanced Disposal, a premium of about 22 percent to Advanced Disposal’s closing price of $27.14 on Friday 12 April, the day before rumours of the deal first appeared. Once completed, the deal will be Waste Management’s biggest acquisition in more than nine years. The companies anticipate the deal will generate more than $100m in savings and capital expenditures annually after close, expected by the first quarter of 2020.

Advanced Disposal is the fourth-largest solid waste company in the US and provides non-hazardous solid waste collection, transfer, recycling and disposal services in 16 states and the Bahamas. Waste Management is the leading company in the sector. Waste Management has around 21 million customers; the deal will add more than 3 million residential and industrial customers, mostly in the eastern half of the US, where Advanced operates.

“At Waste Management, we focus on creating value for all stakeholders, delivering on our commitments to employees, customers, community partners, shareholders and the environment.,” said Jim Fish, president and chief executive officer Waste Management. “The acquisition of Advanced Disposal extends these commitments by adding complementary assets and operations as well as a team with a shared focus on safety, outstanding service and operational excellence.”

He added: “With this acquisition, we will grow our asset footprint to serve more customers and communities and generate significant growth and value creation opportunities for Waste Management’s shareholders and our combined company’s employee base. Waste Management’s disciplined capital allocation and balance sheet strength position us well to execute upon this unique opportunity to expand our scale and capabilities to serve an even broader customer base and realize the strategic and financial benefits the acquisition of Advanced Disposal creates.”

“We are pleased to have reached this milestone agreement with Waste Management to deliver an immediate cash premium to Advanced Disposal stockholders,” said Richard Burke, chief executive of Advanced Disposal. “We view Waste Management as an industry leader with one of the most respected brands in the nation.

“This acquisition stands as a testament to the strength of the Advanced Disposal business and brings together two strong waste management teams with extensive environmental services expertise to better serve our customers and communities,” he continued. “We look forward to working with the Waste Management team to complete the transaction and ensure that we continue to deliver the highest quality service to our customers.”

News: Waste Management to buy Advanced Disposal for about $3 billion in cash

Chevron to acquire Anadarko in £33bn deal

BY Fraser Tennant

In a deal which it sees as a strong strategic fit, integrated energy company Chevron Corporation has acquired Anadarko Petroleum Corporation, one of the world’s largest independent exploration and production companies, in a transaction valued at $33bn.

The acquisition, which significantly enhances Chevron’s already advantaged upstream portfolio and strengthens its leading positions in large, attractive shale, deepwater and natural gas resource basins, will provide Anadarko shareholders with 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share.

One of the world's leading integrated energy companies, Chevron and its subsidiaries are involved in virtually every facet of the energy industry. The company explores for, produces and transports crude oil and natural gas, as well as refining, marketing and distributing transportation fuels and lubricants, and manufacturing and selling petrochemicals and additives.

The transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2019.

“This transaction builds strength on strength for Chevron,” said Michael Wirth, chairman and chief executive of 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 liquefied natural gas (LNG) business. “This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2bn and will be accretive to free cash flow and earnings one year after close.”

Upon closing, Chevron will continue be led by Mr Wirth and remain headquartered in San Ramon, California.

“The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Al Walker, chairman and chief executive of Anadarko. “I have tremendous respect for Chevron’s leadership team and believe its strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets.”

The acquisition is subject to Anadarko shareholder approval, regulatory approvals and other customary closing conditions. 

Mr Wirth concluded: “This transaction creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.”

News: Chevron to buy Anadarko for $33 billion in shale, LNG push