Could it be Exx -- ugh, no, it's just Anadarko.
Investors let out a sigh Tuesday after learning that Anadarko was the mystery bidder Apache recently turned away. The spurned approach was first reported by Bloomberg News on Sunday, which roused speculation that Exxon Mobil -- or another company of that scale -- was scoping out an Apache purchase.
Apache shareholders weren't so lucky.
See, when it comes to the oil and gas industry, there are two classes of heavyweights: the majors and the mini-majors. Anadarko is a mini-major valued at $33 billion, hardly larger than Apache, a $20 billion fuel explorer. It has far less deal firepower than, say, an Exxon, a $343 billion behemoth.
Given their sizes, a merger between Anadarko and Apache would likely have to be paid for in stock, rather than cash. Anadarko already has 2.8 times more net debt than Ebitda, crimping its ability to borrow money for a takeover this large. Apache shareholders would probably prefer stock anyway, instead of selling out near the bottom of the market. That said, investors generally don't like stock deals when the acquirer's shares have lost 30 percent in 12 months.
Beyond that, any synergies between the companies would be minimal. There isn't much overlap among their assets, and shale drillers generally don't benefit much from added scale the way businesses in other industries do.
As Liam Denning pointed out yesterday, such a merger would also reduce Anadarko's own chances of getting bought while increasing the company's presence in less-than-desirable areas such as Egypt. And while acquirers can get oil and gas assets on the cheap right now, Brooke Sutherland says there's a reason Apache is so cheap.
Stocks of both companies dropped Tuesday, a sign that support for a transaction is waning. Apache is still up 12 percent for the week, probably because it's officially in play now. The question is whether Anadarko's approach will drum up interest from other buyers that can offer an appealing enough takeover premium.
But as for a sale to Anadarko: If neither Apache nor the market likes the idea, then there's nothing to see here.
(A previous version of this article was corrected to fix the net debt to Ebitda figure in the fifth paragraph.)
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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