Andeavor (NYSE: ANDV) is flying in the pre-market hours this morning, and for good reason. The company announced that it has entered into a definitive agreement to be acquired. Of course, the acquisition comes at an incredible premium, returning value to investors and leading to excitement in the market. Today, we’ll talk about:
- The acquisition;
- what we’re seeing form ANDV as a result;
- and what we’ll be watching for ahead.
ANDV Makes A Run For The Top On Acquisition News
As mentioned above, Andeavor is having an incredibly strong start to the trading session this morning after the company announced that it has entered into a definitive agreement to be acquired. Under the terms of the agreement, Marathon Petroleum will acquire all outstanding shares of ANDV in a deal with an enterprise value of $35.6 billion.
In the release, ANDV announced that current shareholders will have the option to choose either 1.87 shares of MPC or $152.27 in cash per share. This option is subject to a proration mechanism that will result in 15% of Andeavor’s fully diluted shares receiving cash consideration. The premium on the deal comes to approximately 24.4%. At the close of the transaction, MPC shareholders will own approximately 66% of the combined company with ANDV holders owning approximately 34% of the company. The transaction has been approved by the boards of directors at both companies and is expected to close in the second half of 2018. In a statement, Gary R. Heminger, Chairman and CEO at MPC, had the following to offer:
This transaction combines two strong, complementary companies to create a leading U.S. refining, marketing, and midstream company, building a platform that is well-positioned for long-term growth and shareholder value creation… Each of our operating segments are strengthened through this transaction, as it geographically diversifies our refining portfolio into attractive markets, increases access to advantaged feedstocks, enhances our midstream footprint in the Permian basin, and creates a nationwide retail and marketing portfolio that will substantially improve efficiencies and enhance our ability to serve customers.
Importantly, we expect this transaction will be meaningfully accretive for shareholders, generating approximately $1 billion of tangible annual run-rate synergies within the first three years and significantly enhancing our long-term cash flow generation profile… Given the confidence in the robust cash flow expected to be generated by the combined business, our board also authorized an incremental $5 billion of share repurchases. As a combined company, we will continue our balanced approach to investing in the business and returning cash to our investors, while maintaining our commitment to an investment-grade credit profile.
The above statement was followed up by Greg Goff, CEO and Chairman at ANDV. Here’s what he had to offer:
With significantly increased scale, a strong platform for our midstream businesses and a leading nationwide retail and marketing distribution portfolio, the combined company presents tremendous value enhancement and growth opportunities for all shareholders… This strategic combination provides our shareholders with a premium for their shares and the opportunity to benefit from substantial future value creation at MPC. As the largest refiner by capacity in the U.S., with a best-in-class operating capability and a strong capital structure, the combined company will be exceptionally well-positioned to deliver on its synergy and earnings targets. We look forward to working together to deliver on the full potential of this powerful combination.
What We’re Seeing From The Stock
As investors, one of the first lessons that we learn is that the news moves the market. In this particular case, the news proved to be overwhelmingly positive with Marathon acquiring Aneavor at an incredible premium. So, it’s no surprise to see that the stock is making its way for the top. At the moment (8:28), ANDV is trading at $139.10 per share after a gain of $16.72 per share or 13.66% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on ANDV. In particular, we’re interested in following the story surrounding the acquisition. While the deal has been unanimously approved by both companies, it is still subject to regulatory approval and customary closing conditions. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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