The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, June 23, 2006
Email – #325
** Thanks, Anadarko
Today Anadarko Petroleum announced a staggering buyout of Kerr McGee and Western Gas. It acquired the companies, mostly for cash, and a premium of 40% to 50% above their closing prices as of yesterday. These buys were more significant in their valuation, between 3 and 4 times book value.
For us, this is very good news because it may allow us to unlock the value in our Chesapeake (NYSE: CHK) trade early. The Anadarko deals were so strong that they might ignite a feeding frenzy in the sector. Chesapeake, while huge, is not immune to being taken over. Its market cap is about $12 billion – quite a small bite for a major energy company looking to bite into a low-cost natural gas producer which has some oil assets, billions sitting underground, and strong earnings and cash flow. Maybe this is why CHK’s CEO has been buying up shares of his own company.
Hold tight to your position, and look for a lot more attention coming our way.
Good trading,
Karim
