Chevron offer for Anadarko – when cheap money meets rising oil prices

A return to ‘cheap money’ by the Fed and stabilising oil prices and it is perhaps not surprising to see a return to acquisition led growth strategies. For Chevron, its $50bn agreed offer for Anadarko looks to be broadly OpFCF neutral after $1bn of projected OpEx cost synergies from combining these two predominantly North American upstream producers, while the proforma EBITA yield of around 7% provides for some useful earnings accretion on the approx 50% of the deal being financed by cash & debt assumption. What works for CVX however, may also apply for its rivals and Friday’s announcement may also smoke out a third party and higher offer to try and crash this party.

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