Chevron Corporation announced this Friday it had submitted a proposal to Noble Midstream board of directors to buy the company through a common stock transaction. At least the portion of Noble’s shares that it doesn’t own already.
Firstly, the proposal is “to acquire all of the publicly held common units representing limited partner interests in Noble; not already owned by Chevron and affiliates.”
Secondly, the company underlined that “is proposing to acquire the Common Units through a merger transaction in exchange for shares of common stock of Chevron, at a value of $12.47 per Common Unit.”
However, the deal, valued at around $1,13 billion, is non-binding and there is no assurance that any approvals from Noble Midstream will be forthcoming; in fact, a definitive agreement may not be consummated.
Nevertheless, the offer comes right after the company had bought the pipeline’s sponsor, Noble Energy.
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Chevron with the high ground after Noble energy buyout
On the other hand, Chevron is the second largest oil producer in the United States. In October closed the Noble Energy transaction at a $4,1 billion cost. It was an all-stock purchase, and, additionally, gained for Chevron a 63% stake in Noble Midstream; also a large portion of the rival’s gas reserves.
After Chevron announced the offer, Noble Midstream’s units rose more than 6%; to nearly $13,15 in the early trade session this Friday.
Although experts consider the consolidation of the offer is the most likely scenario; the market is likely to focus on similar deals, in order to get premiums over the finish line, said Tudor, Pickering Holt analysts, quoted by Reuters.
Moreover, for Ethan Bellamy, managing director at East Delay Capital, Noble’s stakeholders should not expect a better offer by the oil major. “We expect the transaction to be consummated expeditiously, without regulatory impediments,” Bellamy said.
Finally, Rob Thummel, energy portfolio manager at Tortoise Capital, said. “The transaction’s biggest benefit to Chevron is to simplify its corporate entity.”
In conclusion, this could be an opportunity for Chevron to align better to its asset portfolio and take advantage of steadier cash flows than its oil drilling business.