As we have noted since the Central Banksters started to rapidly raise interest rates, the decade’s long merger and acquisition spree is over. However, the “Bigs” will still get bigger, as they buy out overleveraged companies that can’t afford to borrow at high rates to refinance while, at the same time, recessionary pressures erode their profitability.
A few of the “Bigs” with big money that want to get bigger will do what they can to buy out competitors and/or expand in new directions.
EXXONMOBIL BUYS MAJOR SHALE PRODUCER FOR $59.5 BILLION IN STOCK
ExxonMobil Corp. will take over Pioneer Natural Resources, a major producer of shale oil and gas, in a stock swap valued at $59.5 billion, the Associated Press reported.
If Pioneer stockholders approve the deal, they will receive 2.3234 shares of Exxon in return for each Pioneer share they own. Both companies’ boards have already greenlighted the acquisition.
Including debt, the deal is costing Exxon about $64.5 billion, the AP said.
Pioneer and Exxon are major players in the Permian Basin, which spans the border between New Mexico and Texas and is ranked as the world’s second-largest oilfield. Pioneer has 850,000 acres under lease in the region and Exxon holds 570,000.
The new, bigger ExxonMobil will have about 16 billion barrels of oil equivalent in the Permian and will double its production to 1.3 million barrels a day, rising to as much as two million by 2027, depending on the oil market’s strength.
“The combination of ExxonMobil and Pioneer creates a diversified energy company with the largest footprint of high-return wells in the Permian Basin,” Pioneer CEO Scott Sheffield said in a statement announcing the deal.
ExxonMobil has been gobbling up companies for decades, beginning with the $80-billion merger of Exxon and Mobil in 1999. ExxonMobil paid $36 million for XTO Energy in 2009. In July, it picked up Denbury Inc., which scours leftover oil out of old wells, for $4.9 billion in stock.
ExxonMobil reported a record profit of $55.7 in 2022, surpassing its earlier $45.22-billion record in 2008.
Last December, the company announced it was expanding its stock buyback program to $50 billion through 2024, up from $30 billion it had planned through the end of this year.
Using stock to buy competitors will minimize the company’s cash outlay and debt load as it seeks additional reserves and territory.
MICROSOFT CLINCHES DEAL TO BUY ACTIVISION
After 21 months of regulatory wrangling, Microsoft has won approval for its’ $75-million purchase of video game maker Activision Blizzard, creator of iconic games including Call of Duty and Candy Crush.
The deal is the largest in Microsoft’s history and gives it a central position in the gaming industry. Along with its 49-percent ownership of OpenAI, Microsoft is centering itself in key trends in computing.
Buying Activision will more than double Microsoft’s gaming revenues to an estimated $24 billion. It also helps Microsoft shift its gaming portfolio away from Xbox and more into games that are dispersed through the web and the cloud.
The acquisition is one of a rapid series under CEO Satya Nadella, who took the company’s reins in 2014. Since then, he has bought LinkedIn for $26 billion, Nuance Communications for $16 billion, and game company ZeniMax Media for $7.5 billion.
In the last six years, Microsoft has made 326 purchases costing more than $170 billion, data service Dealogic said.
Nadella’s objective is to move into emerging areas as quickly as possible, colleagues told The Wall Street Journal.
“If he can do that by buying something that helps him do it faster, he will,” former Microsoft CIO James DuBois told the WSJ.