Miner BHP Billiton's acquisition strategy was back in the spotlight on Friday as market talk resurfaced it was looking at a $40 billion-plus bid for Anadarko Petroleum although banking sources said they were unaware of any imminent offer.
BHP, under pressure to land a big deal after scrapping a $39 billion bid for Canada's Potash Corp in November, declined to comment on the rumors which drove Anadarko's shares as much as 8 percent higher in U.S. trade.
Fund managers and analysts said Anadarko was a good strategic fit for BHP which is sitting on a pile of cash and needs to expand. Speculation that BHP Chief Executive Marius Kloppers was eyeing Anadarko first surfaced in September when the U.S. firm's shares were hit by its exposure to BP's Gulf of Mexico oil spill.
An unsourced report in Britain's Daily Mail newspaper said BHP may offer $90 per share, propelling the miner's growth strategy back in the headlines during holiday trade.
The portfolio of exploration and assets in Anadarko would be appealing to BHP and the stock has probably suffered in terms of fallout from the BP situation in the Gulf of Mexico so it might be an opportune time for BHP to make a step change in terms of that portfolio, said Tim Schroeders, portfolio manager at Pengana Capital.
One source familiar with BHP's thinking but not directly working with the company downplayed the Daily Mail report as unreliable. A spokesman for Anadarko said it was company policy not to comment on speculation.
Some analysts said the $90 per share figure would not be enough to land a deal.
While we believe speculation of a bid at this level is supportive it is not likely credible in our view: the price is simply too low, Bank of America Merrill Lynch analysts said, pointing to Anadarko's base case value of $110 per share which did not factor in recent oil price rises and exploration successes.
On Thursday, Anadarko's shares surged to $76.5, their strongest level since mid-2008, exceeding highs reached before the oil spill. Anadarko owns 25 percent of the ruptured Macondo well that BP operated.
On Friday, BHP shares ended down 1.3 percent in a weak broader market.
Anadarko, which has a huge portfolio of deepwater oil and gas discoveries and Australia's Woodside Petroleum have been touted as potential targets for BHP since its Potash bid was killed in November.
Investors said BHP has grown so big in mining, takeover attempts would run into regulatory opposition, and the oil and gas sector, where it is relatively small, was the easiest path for the company to go.
Woodside has also been cited as a potential target after Royal Dutch Shell sold its stake in November.
It is far from a done deal obviously but there is probably a higher probability of BHP buying Anadarko than Woodside, said Schroeders of Pengana Capital.
An investment banker who has previously worked with BHP said the miner traditionally surprised the market by bidding for a target which had not been the subject of long-running speculation.
However, fund managers and analysts said a BHP acquisition of Anadarko made sense for the miner.
They have a lot of good assets around the world, they would be a good buy for someone, Mike Breard, an oil analyst with Hodges Capital Management in Dallas, said, adding that Anadarko's future liability for the Gulf oil spill was still a big unknown.
It's not new but for whatever reason it's finding traction again this morning, said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
Shares of Houston-based Anadarko rose to a session high of $76.50, eclipsing a 52-week high of $75.07 reached on April 15, just days before the rig explosion and oil spill that spewed more than 4 million barrels of crude into the Gulf.
The stock later pared some gains, but ended up 6.9 percent at $75.59.
After the spill, shares of Anadarko slid to a low of $34.54 as investors worried over the company's liability in the disaster that left 11 workers dead and caused the worst U.S. offshore oil spill.
(Additional reporting by Anna Driver in Houston; Editing by Balazs Koranyi and Anshuman Daga)