M&A fever continues as ConocoPhillips feasts on Marathon and Wood Group receives fourth bid

“Global equities shuddered at the prospect of interest rates staying higher for longer. Despite plenty of earlier signals that central banks were in no rush to cut rates until inflation had fallen further, investors are only now coming to terms with the idea that monetary policy will stay tight for just a bit longer,” says Dan Coatsworth, investment analyst at AJ Bell.

“All things considered, the scale of the equity market sell-off was only minor. The S&P 500 dipped around 0.6% in early trading for Wall Street, less than European indices which included a 0.85% sell-off for the FTSE 100 and a 1.5% decline in the CAC 40.

“Investor unease means that Friday’s US inflation data has the potential to move the market in a big way. Core PCE prices, which exclude food and energy, were steady at 0.3% on a month-on-month basis for February and March and the consensus estimate is for this trend to remain intact for April. Investors might start the weekend in a very bad mood if that figure comes in hotter than expected.”

BHP / Anglo American

“Takeovers remain a hot theme for markets and some of the big guns are out in force, with the commodity sector centre of attention. There is plenty of drama as a FTSE 100 takeover attempt has collapsed.

“Anglo American started the day by responding to BHP’s latest efforts to buy the company and the feedback wasn’t encouraging. Anglo still didn’t like the structure of the deal despite BHP’s efforts to address some socioeconomic issues. From the start, the structure of the takeover looked too complicated and ultimately investors prefer hard cold cash, not an all-share bid.

“The prospect of a corporate marriage was looking slimmer by the hour and BHP finally confirmed just before the UK market close that it had given up and walked away. This isn’t a surprise as the deal looked doomed from the start.

“In effect, BHP has done all the hard work in sounding out whether Anglo American was willing to be bought and in what way it might accept a bid. BHP has fired the starting gun for others to throw their hat into the ring and it seems almost certain that another player could bid for Anglo American in the near future.

“Buying Anglo American would provide a ready-made spread of copper assets which are of increasing importance to the global energy transition from fossil fuels to renewables. Copper is used in wind farms, electric vehicles and so many other ‘new era’ energy devices. Miners are hungry for more and it is much easier to buy another company that is already sitting on proven resources than spend years on exploration.

“All eyes are now on Glencore and Rio Tinto to see if they fancy their chances at buying Anglo American.”

ConocoPhillips / Marathon Oil

“ConocoPhillips buying Marathon Oil is the latest in a long line of deals in the natural resources space as companies open their wallets to boost scale.

“On paper, the takeover has plenty to excite ConocoPhillips’ shareholders – immediately earnings enhancing, lots of cost synergies and more low-cost supply of oil. However, the negative market reaction is telling, particularly as ConocoPhillips isn’t paying a chunky premium to buy Marathon. There is some chatter that Marathon’s assets aren’t high quality which might be a turn-off for ConocoPhillips’ shareholders.”

Wood Group / Sidara

“As an engineer to the oil, gas and mining sectors, Wood Group is well versed in resource companies going through corporate change through takeovers, mergers and disposals. But it’s now on the receiving end of a bid which is also being drawn out. Sidara has now tabled its fourth and final offer for Wood Group at 230p per share.

“The first three bids were rejected and the market reaction to the final one doesn’t bode well – the shares slipped to 185p which implies this deal is also dead in the water. Wood Group hasn’t engaged in any discussions with Sidara since the first approach and that suggests it has no interest in being gobbled up.”

These articles are for information purposes only and are not a personal recommendation or advice.