A View Behind The Occidental-Anadarko Deal
Steve Hendrickson, President of Ralph E. Davis Associates, was interviewed by HartEnergy.com offering commentary about the intricacies involved behind the Occidental-Anadarko deal, the fourth-largest upstream oil and gas transaction ever and the largest since Shell's $82.7 billion purchase of BG Group in 2016, and what broader market implications could occur as a result of the transaction.
“Obviously, the boards of the companies are tasked with making certain that whatever they do is in the best interest of the shareholders,” Hendrickson said. “The challenge can be that different offers may benefit the shareholders in different ways which can cause difficulty in comparing them. For instance, in an all-cash offer vs. an all-stock offer, you can’t strictly look at just the valuation because if you take an all-stock offer, you’re essentially taking the sale proceeds and reinvesting them into the acquiring company.
“For some buyers and sellers that works out well,” Hendrickson continued. “Some sellers may like the opportunity to continue to participate in the company and think the combined company will be able to do even better than their company could have done on its own, so they may be very happy to take a lot of stock.
“When we have a mix of stock and cash, we face concerns about valuation questions, the outlook for the business and the management team’s ability to execute that. That is, will the team that is going to be the go-forward management team be capable of executing the plan that extracts the greatest amount of value?”