Anadarko Petroleum Corp.’s board has declared Occidental Petroleum Corp.’s sweetened US$38 billion takeover “superior,” giving Chevron Corp. until May 10 to either boost its offer or walk away from the oil industry’s biggest deal in at least four years.
The announcement by Anadarko, which had rebuffed several prior bids from Occidental, comes almost a month after it agreed to be purchased by Chevron for US$33 billion. Chevron has so far refused to increase its offer, saying its proposal is a better long-term option for Anadarko shareholders. If it decides not to raise the bid, Chevron can walk away with a US$1 billion breakup fee.
The takeover of Anadarko has been a rare public fight for an oil industry that hasn’t seen many bidding wars. Occidental Chief Executive Officer Vicki Hollub’s recruitment of billionaire Warren Buffett and an US$8.8 billion accord to offload African oil and gas fields to Total SA appeared to have been key milestones in winning the board’s favour. Anadarko directors had previously chosen Chevron’s offer even though it was substantially cheaper than that of Occidental, which, as a smaller company, would have to take on much more leverage to do the deal.
“We think Chevron is likely to make a counter offer, but it may not be high enough to win the bid,” said Leo Mariani, an analyst at KeyBanc Capital Markets. Chevron, boosted by more valuable stock, will have to offer around US$70 a share to be considered by Anadarko, costing it an extra US$3.2 billion, he said.
The period for Chevron’s response may be extended under the terms of the original agreement, Anadarko said in a statement after the market closed Monday. In a separate statement, Chevron acknowledged Anadarko’s response and declined to make any further comment.
Anadarko was little changed at US$75.50 at 8:50 a.m. in pre-market trading in New York, less than US$1 below the value of Occidental’s offer. Occidental was also little changed at US$58.65. Chevron was 0.6 per cent lower at US$117.70.
Chevron CEO Mike Wirth has signalled he’s willing to end his pursuit of a deal if the price gets so high that it imperils investor returns. “We strongly believe that the combination of our two companies create superior long-term value for shareholders of the combined company,” Wirth said on an April 26 earnings conference call.
While buying Anadarko would expand the producer’s presence in the Permian Basin, which is now the world’s largest oil patch, there are other operators in the region that Chevron could acquire. Chevron also has existing ambitious growth plans for the Permian.
Houston-based Occidental over the weekend pressed to alleviate any remaining concerns from Anadarko. It said Sunday that 78 per cent of the deal will be paid in cash, up from 50 per cent, and it got rid of the need for a shareholder vote, which had previously been cited as a sticking point for Anadarko’s directors.
“We have long been convinced that a strategic combination with Anadarko represents a compelling opportunity for the shareholders of both Occidental and Anadarko,” Occidental said in a statement after Anadarko accepted the suitor’s offer.
At least one major Occidental investor has signalled that it’s ready to break with the company’s board of directors. T. Rowe Price Group Inc. told Reuters it intends to vote against the board after the company eliminated the need for shareholder approval in its revised bid.
“With the OXY deal looking safer for APC to accept, I’d say this may force CVX to match the OXY bid or lose out on these terrific assets,” said Bill Nygren, chief investment officer of Harris Associates LP, which manages US$120 billion and owns about 3 per cent of Anadarko.
With assistance from Joe Carroll
You can read more of the news on source
