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.
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).