Anadarko to pursue deal talks with Occidental Petroleum unleashing bidding war with Chevron

Anadarko Petroleum Corp said on Monday it planned to resume talks with Occidental Petroleum Corp over its US$38 billion bid lodged in competition with an earlier US$33 billion bid from Chevron Corp.

Anadarko said its board had unanimously decided that Occidental’s proposal could result in a “superior proposal,” but added that it continued to recommend Chevron’s offer at this point.

People familiar with the matter had earlier told Reuters on Sunday that Anadarko had decided to begin negotiations to sell itself to Occidental instead.

• Bidding war on for Anadarko Petroleum as Occidental makes competing offer
• Occidental offers $76 per share in cash and stock for Anadarko, says offer is 20% premium to $33B deal with Chevron
• Chevron to buy Anadarko in $33-billion bet on shale oil and LNG — the biggest energy deal in four years

Occidental shares dipped 2.1 per cent to US$60.00 in trading before the bell on Monday, while Anadarko and Chevron traded marginally lower.

Chevron and Occidental have locked horns over Anadarko’s assets in the lucrative Permian Basin of West Texas and New Mexico – the vast shale field with oil and gas deposits that can produce supplies for decades using low-cost drilling techniques.

A deal would add nearly a quarter million acres to Occidental’s holdings in the Permian shale basin, and double its global production to 1.4 million barrels of oil and gas per day.

Monday’s announcement puts pressure on Chevron Chief Executive Officer Michael Wirth to increase its US$65-a-share offer.

Under terms of the merger agreement, Chevron has four days after being notified by Anadarako’s board to respond with a counter-offer. Chevron’s share decline had reduced the effective current value of its April 12 offer to US$31 billion.

Occidental’s surprise US$76-per-share bid last week values Anadarko at US$57 billion, including debt – well above Chevron’s US$50 billion including debt.

“We could put more cash in if that’s what Anadarko wanted to do,” Chevron Chief Financial Offer Pierre Breber said on the company’s earnings call with analysts on Friday.

However, Anadarko would have to pay Chevron a US$1 billion break-up fee if the oil major finally loses out to Occidental, according to the terms of their deal.

Evercore and Goldman Sachs & Co. LLC are acting as financial advisors to Anadarko. Wachtell, Lipton, Rosen & Katz is acting as legal advisor to Anadarko.

© Thomson Reuters 2019