Increased speculation has Australian mining giant BHP Billiton preparing a cash offer of $90 a share, or $44.6 billion, for Houston-based Anadarko Petroleum, one of the world’s largest independent oil and gas producers. However, some analysts believe BHP Billiton will have to increase its offer to $110 a share or more in order for the deal to work.
As of Dec. 31, Anadarko shares were trading at nearly $77 a share, up nearly $27 a share since speculation of the BHP Billiton buyout first surfaced in early September. Anadarko stock is currently trading at a 52-week high and has been as low as $34.54 this year.
Spokesmen for Anadarko and BHP Billiton declined to comment on the acquisition reports, although it appears likely that BHP Billiton is the source of the rumors. Anadarko is famously close-mouthed about its deals. Prior to its 2006 acquisition of Kerr-McGee and Western Gas Resources, executives for the three companies reportedly met in airplane hangars to negotiate in order to avoid being seen together.
After BHP Billiton failed in its efforts to acquire Canadian fertilizer giant Potash Corp. and mining giant Rio Tinto this year, company executives have hinted that they would like to add a large petroleum company to their portfolio. Anadarko, as the largest independent producer in the Gulf of Mexico and a major holder of shale assets in the US, would seem to be a good fit for the Australian company. Anadarko also has several major development projects underway in Ghana, Brazil, and Algeria.
Anadarko stock fell earlier this year after the fatal explosion aboard the BP-operated Macondo well in the deepwater Gulf of Mexico and the subsequent massive oil spill. Anadarko has a 25% stake in the well, which has raised questions about potential liability for the company.
In November, Credit Suisse analysts said that Anadarko, along with Australia’s Woodside Petroleum, were likely acquisition targets for BHP Billiton. Anadarko reportedly has $19 billion in undeveloped oil and gas projects, which could be developed more quickly with a cash injection from BHP Billiton, which is financially very healthy.
A recent Credit Suisse report says that Anadarko “holds the deepest and most scalable asset portfolio [among independent petroleum companies]” and is a very attractive acquisition target.
If the $90-or-better offer is completed, it would easily surpass the $41 billion merger between XTO Energy and Exxon Mobil Corp., which was completed in 2010 and was the largest deal in the petroleum industry in years.