Occidental Petroleum Increases Bid For Anadarko Petroleum
Late last night, Anadarko Petroleum Corporation (APC) confirmed that it had received a revised proposal from Occidental Petroleum Corporation (OXY) under which Anadarko shareholders would receive $59.00 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock.
The offer is noticeably different because (1) it delivers a higher proportion of the offer price in cash and (2) is eliminates the closing requirement of Occidental stockholder approval.
Previously, Anadarko had entered into a definitive merger agreement with Chevron Corporation (CVX) on April 11th, under which each Anadarko share would be swapped for $16.25 in cash and 0.3869 shares of Chevron common stock.
For comparative purposes, here is the price of each offer using stock prices prior to the market open on May 6th, 2019:
The offer from Occidental Petroleum is unquestionably more valuable for current APC shareholders. With that said, it is highly likely that Chevron submits a counteroffer for Anadarko, so this deal is far from a certainty at this point.
In addition, Anadarko seems to prefer Chevron as the acquirer based on their responsiveness to Occidental Petroleum’s bids. In a letter sent to Anadarko’s management team, Occidental’s Chief Executive Officer Vicki Hollub wrote:
“We remain perplexed at your apparent resistance to obtaining far more value for Anadarko shareholders which has been expressed clearly through our interactions over the last week.”
Mrs. Hollub has also objected to Anadarko’s demands for three board seats as part of the deal.
In any case, the Anadarko Petroleum deal has the potential to be transformative for Occidental Petroleum Corporation. If the deal closes, it will trigger the following actions:
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The issuance of $10 billion of 8% preferred stock to Warren Buffett’s Berkshire Hathaway
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The sale of Anadarko’s assets in Africa to French oil giant Total SA (TOT) for $8.8 billion
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Additional asset sales to bring the total to roughly $10 billion to $15 billion to decrease the added leverage on its balance sheet.
Many uncertainties remain surrounding Occidental’s bid for Anadarko Petroleum. Accordingly, investors with interests in either organization should watch this story closely moving forward.