Today’s Blog – Monday 20th February 2017

Today’s offering is a shorter flash-blog only


Friday’s stunning US$143B takeover offer for Anglo-Dutch consumer goods giant Unilever has potential implications for other industries, including our own.

Although swiftly rejected, the approach from PE (and Berkshire Hathaway) backed Heinz-Kraft, has not necessarily gone away and we may see a reprise of what has happened in global brewing in recent years – relentless consolidation through massive deals.

Some of the factors driving the hostile approach include:

  • Buying a sterling denominated company in strong dollars.
  • PE running out of things to do.
  • Low cost of debt.
  • Animal spirits as exemplified by the record Dow.

The same factors could drive action in the E&P sector and in addition:

  • Many think that the US dollar could strengthen further under the likely Trump tax plans.
  • Conviction about the oil price seems to be strengthening which could embolden PE.
  • Some companies (e.g. BP) have the same pound/dollar dynamic.

Commodity prices

Oil closed flat on Friday, with Brent at US$55.81 and WTI at US$53.40.  Overall the week finished where it started.

The BHI rig report had the recent usual rise – oil rigs up 6 and gas rigs 4. Lets see whether Monday’s trading reacts negatively to this as has been the pattern recently.

Henry Hub was also flat on Friday at US$2.83 (down 4% for the week on warm weather and larger than expected inventory builds).


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