Occidental to acquire Anadarko, after Chevron drops out of bidding war

Occidental Petroleum Corp. entered into a definitive agreement on 9 May to acquire Anadarko Petroleum Corp. for USD59.00 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock, in a transaction valued at USD57 billion, including the assumption of Anadarko’s debt. The announcement was made following Chevron Corp.’s decision not to make a counterproposal after Occidental Petroleum presented a higher offer.

On 12 April, Chevron announced that it had entered into a definitive agreement to acquire Anadarko Petroleum in a stock and cash transaction valued at USD33 billion or USD65 per share. Under the proposed merger agreement with Chevron, Anadarko shareholders will receive 0.3869 shares of Chevron and USD16.25 in cash for each Anadarko share.

Occidental Petroleum’s original offer announced on 24 April, was USD76.00 per share, in which Anadarko shareholders would receive USD38.00 in cash and 0.6094 shares of Occidental common stock for each share of Anadarko common stock. Occidental’s original proposal represented a premium of approximately 20% to Chevron’s.

On 5 May, Occidental Petroleum announced a revised offer with a higher cash component, USD59.00, in addition to 0.2934 shares of Occidental common stock per share of Anadarko common stock.  This offer came after Berkshire Hathaway’s announcement that it will invest USD10 billion in Occidental Petroleum, allowing the latter to offer more cash for the Anadarko deal.

Occidental Petroleum also entered into a binding agreement to sell Anadarko’s Algeria, Ghana, Mozambique, and South Africa assets to Total S.A. for USD8.8 billion. The sale is contingent upon Occidental entering into and completing its proposal to acquire Anadarko.

“Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal,” said Chevron’s Chairman and CEO Michael Wirth.

Upon termination of its merger agreement with Chevron Corp., Anadarko will be required to pay Chevron a termination fee of USD1 billion.

“This exciting transaction will create a global energy leader with a world-class portfolio, proven operational capabilities and industry-leading free cash flow metrics,” said Vicki Hollub, president and CEO of Occidental.

Occidental’s acquisition of Anadarko has now been unanimously approved by the Boards of both companies.

The transaction is expected to close in the second half of 2019 and is subject to customary closing conditions, including approval from Anadarko’s shareholders and the receipt of regulatory approvals.