Anadarko's Bid for Apache Drives Down Share Prices for Both E&Ps

Anadarko Petroleum Corp.’s all-stock offer to buy Apache Corp. was met with a curt, “No thanks,” and it might be a sign that the highly anticipated mergers and acquisitions (M&A) wave insiders have been predicting is still a quarter or two away.

Anadarko confirmed in a statement on Wednesday it had sent a non-binding offer to acquire Apache in a transaction that CEO Al Walker said would have been “highly accretive to Anadarko on a cash flow per-share basis, event before synergies.”

Apache summarily rejected Anadarko’s overture to explore the merits of such a deal privately.

“We are unwilling to pursue the transaction without access to detailed non-public information, and based on our analysis, which shows that Apache appears to trade at or near full value currently, the offer was withdrawn,” Walker said in the statement.

Analysts at Simmons & Company International said in a note to investors that by combining the companies, Anadarko would have had many opportunities to leverage their operations and portfolio – which could mean asset sales – to create additional value.

Thursday morning (CST), Anadarko (NYSE: APC) shares were trading down almost 1 percent to $60.41 each. Apache Corp. (NYSE: APA) was trading down more than 2 percent at $48.29 each. That’s after steady decreases throughout Wednesday.

Morningstar Inc. analyst Mark Hanson said the bid suggested Anadarko hadn’t done much due diligence, just following information that was publically available.

“Anadarko was kind of bottom fishing and Apache thinks it assets are worth more,” he told Rigzone. “It’s two companies that have reasonable disagreement on what the assets are worth.”

Apache shares have been trading around $50 each, even less on Wednesday, and Anadarko probably thought based on that price, it was a reasonable ask.

The move itself, though, was somewhat surprising because Apache’s assets are scattered throughout the world – not in a concentrated play that conventional wisdom says is most desirable in the current market.

As for the M&A uptick that is expected to kick in, Hanson said it’s more likely in the second half of 2016.

“They haven’t reached the point of maximum pain, when hedges roll off and there’s been a period of no activity,” he said.

An award-winning journalist, Deon has reported on energy, business and politics for almost 20 years.

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