Market Overview

Evaluating Three Potential Acquirers of Chesapeake

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Today, Financial Times released an article that brought up companies, including Chevron (NYSE: CVX), Total (NYSE: TOT), Devon (NYSE: DVN), Apache (NYSE: APA) and Occidental (NYSE: OXY), that could be interested in purchasing Chesapeake's (NYSE: CHK) assets. Asset sales could help Chesapeake pay down its more than $10 billion of debt.

Total seems to offer the highest potential as an acquirer of Chesapeake, given that the company has purchased Chesapeake's assets in the past, and that it has one of the largest cash hoards of any oil company.

Chevron could afford to purchase Chesapeake, but its stock has performed well relative to its competitors over the last year at least in part because of its focus on oil. Acquiring Chesapeake could undermine this advantage by exposing the company to Chesapeake's sizable natural gas related holdings.

BP could be less likely than Total and Chevron as a potential acquirer, because its shareholders are trying to get the company to sell assets, rather than purchase them.

If any of these companies were to purchase Chesapeake, Chesapeake's debt-laden and otherwise insecure state could put it at a disadvantage in negotiations. This could lead to the acquisition occurring at a lower premium. Shares of Chesapeake are trading more than 2% lower for the day.

Posted-In: News M&A


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