Upcoming Oil, Gas M&A Action 'Old News'
Stocks in the United States were rallying earlier Wednesday, as Dow Chemical Co (NYSE: DOW) is in its advanced stages of merger talks with E I Du Pont De Nemours And Co (NYSE: DD). In what may be the largest deal in the chemicals industry, the transaction would create the world's second-largest chemical company behind BASF SE (ETR: BAS), as well as the largest pesticide and seed company, surpassing Monsanto Company (NYSE: MON).
An announcement may come as early as this week, according to people with knowledge of the matter. Following the merger, Dow Chemical would then be able to break into about two to three businesses due to regulatory issues; however, there is no guarantee that the DuPont-Dow Chemical deal will be completed. In fact, the talks are still said to be far apart.
Kellner Merger Investor Fund predicted the wave of oil and gas M&A was on the horizon months ago.
M&A Action Ahead
Benzinga had a chance to speak with Chris Pultz, manager of the Kellner Merger Investor Fund, about his take on the much-discussed wave of oil and gas M&A. Pultz assured Benzinga that the action is still ahead, and it's only a matter of time.
He believes many potential deals have been put on hold for now until companies are more confident in volatile oil prices.
"If you're the seller of an asset, you don't want to be the guy who sold your company at $45 oil after it rebounds back to $65-plus," Pultz added. "Once you get one big guy making a move, it's going to be a pile-on effect where it will be a scramble for people to pick up the assets before they start to trade up again."
With the continuing stream of major deals such as the ones announced, as well as the potential for a landslide of oil and gas deals in the near future, the M&A market appears as strong as healthy as it has ever been.
Morgan Stanley's oil services analyst Ole Slorer said that companies with a market cap of less than $10 billion and low leverage along with differentiated technologies represent the ideal acquisition. Slorer expects additional M&A activity, with equipment names as the "main focus," although the consolidation activity could eventually spread to offshore drillers and domestic pumpers.
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