Wall Street Weighs In On Chevron Following Anadarko Deal

Chevron Corporation CVX shares are down about 4 percent since the company announced a $33 billion buyout of Anadarko Petroleum Corporation APC on Friday.

The merger would be the sixth-largest buyout in the history of the oil and gas space, and would help Chevron beef up its Permian Basin presence, expand its Gulf of Mexico operations and increase its liquid natural gas portfolio. However, the market doesn’t seem particularly enthusiastic about the deal.

Several analysts have weighed in on the Chevron-Anadarko merger. Here’s a sampling of what they’ve had to say.

A Win-Win

Morgan Stanley analyst Devin McDermott said Chevron made the right call and Anadarko will boost the company’s free cash flow per share, EPS and dividend coverage.

“We see the deal as a win-win for shareholders of both companies, offering substantial strategic benefits, strong synergies and attractive accretion,” McDermott wrote in a note.

Morgan Stanley has an Overweight rating and $150 target on Chevron.

Joule Financial founder Quint Tatro said Chevron’s Friday sell-off is a buying opportunity.

“Basically it expands their shale play, their deep-water drilling, so it’s hard to do but ultimately I think this is a day where you’ve got to hold your nose and you go in and you add to your Chevron position,” Tatro said.

Deal Makes Sense

MKM Partners analyst John Gerdes said the merger makes sense, and he sees no potential for regulatory push-back.

“Given no antitrust concern (fragmented industry), the substantive premium offered, and the fiduciary reasonability of the board of directors to conduct a thorough vetting process as to alternative, industrially logical acquirers given the circumstances (creditable bid), we believe with near certainty that Chevron will successfully consummate the acquisition of APC,” Gerdes wrote.

Mizuho analyst Paul Sankey said it’s important for investors to remember that Chevron was well-positioned prior to this deal, so management must see a clear advantage to the merger.

“So they view this through the prism of capital efficient opportunity – and APC was a stock beaten up for reasons that Chevron can change,” Sankey wrote.

Mizuho has a Bay rating and $140 target on Chevron.

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