Chevron To Buy Anadarko In $33B Deal

Integrated energy global giant Chevron Corporation CVX said Friday it reached an agreement to acquire Anadarko Petroleum Corporation APC, one of the world's largest independent exploration and production companies.

What Happened

As part of the merger agreement, Chevron will pay Anadarko shareholders $16.25 in cash plus 0.3869 Chevron shares for each Anadarko share held. The deal values Anadarko's stock at $65 per share and represents a premium of more than 35 percent from Thursday's closing price.

Anadarko's stock traded at $61.90 ahead of Friday's market open, up 32 percent. At the same time, Chevron's stock was lower by more than 4 percent.

Why It's Important

Chevron's acquisition of Anadarko is intended to enhance its Upstream portfolio and further improve on its already leading positions in large, attractive shale, deepwater and natural gas resource basins, the companies said. The deal is expected to translate to:

• $1 billion in run-rate cost synergies before taxes;
• Capital spending reductions of $1 billion within a year of closing
• Become accretive to free cash flow and EPS assuming $60 Brent pricing;
• Opportunity to divest $15 to $20 billion of assets through 2022; and
• An increase in share buybacks from $4 billion to $5 billion per year.

The deal has been approved by both companies' board of directors and remains subject to approval by Anadarko shareholders and customary closing conditions. Once the transaction closes the combined entity will be run by Chevron CEO and Chairman Michael Wirth.

Occidental Petroleum OXY had bid more than $70 a share for Anadarko in cash and stock earlier, CNBC's David Faber reported Friday morning, but the company decided to go with Chevron.

"Occidental is now considering its options. The Chevron-Anadarko break-up fee is said to be 3% of the deal price," sources told CNBC.

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