Oil and gas producer Anadarko Petroleum Corp on Friday said it agreed to buy Kerr-McGee Corp and Western Gas Resources Inc in separate deals totalling over $21 billion to expand in the fast-growing Gulf of Mexico and Rocky Mountains regions.
The deals - both at large premiums to the share prices of the target companies - are the latest in the red-hot energy sector, which is enjoying a windfall from soaring oil and gas prices. Mid-tier companies that focus on oil exploration and production, in particular, have become attractive take-over targets as oil prices hover around $70 a barrel.
Anadarko plans to acquire Kerr-McGee for $16.4 billion, or $70.50 a share, plus the assumption of $1.6 billion debt. The offers represents a 40 percent premium to Kerr-McGee's closing stock price of $50.30 on Thursday.
Woodlands, Texas-based Anadarko also agreed to buy Western Gas for $4.7 billion, or $61 a share, and to assume $600 million of debt. That offer represents a 49 percent premium to the company's closing price of $40.91 on Thursday.
Anadarko's shares fell nearly 6 percent to $45.63 in morning trade, while Kerr-McGee rose more than 36 percent to $68.50. Western Gas soared about 46 percent to $59.56. Charles Maxwell, an analyst at Weedon & Co, said he's never seen such a rich premium in an oil company acquisition in 49 years in the energy industry.
"I've never seen that much of a premium in an all cash deal," Maxwell said, referring to Kerr-McGee. "It suggests a change of mind, in terms of sharpening the pencil, to acquire these assets quickly, because the assumption behind such a wonderful offer is that if you don't get these assets now, someone else will come along and offer them even more." Anadarko said it will finance the deals through a $24 billion, 364-day committed acquisition facility provided by UBS, Credit Suisse and Citigroup.