From Bloomberg

Anadarko Petroleum Corp.’s board has declared Occidental Petroleum Corp.’s sweetened $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 $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 $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 $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 favor. 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 $70 a share to be considered by Anadarko, costing it an extra $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 $75.50 at 8:50 a.m. in pre-market trading in New York, less than $1 below the value of Occidental’s offer. Occidental was also little changed at $58.65. Chevron was 0.6 percent lower at $117.70.

Chevron CEO Mike Wirth has signaled 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 percent of the deal will be paid in cash, up from 50 percent, 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 signaled 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 $120 billion and owns about 3 percent of Anadarko.


From The Wall Street Journal

Anadarko Petroleum Corp. APC -0.01% said Monday that a $38 billion bid by Occidental Petroleum Corp. was superior to an offer it accepted from Chevron Corp. , raising the stakes in the battle for the company.

Anadarko said it had notified Chevron that it will terminate the $33 billion deal it struck with Chevron in favor of Occidental’s offer, a day after Occidental sweetened its bid by raising the cash portion.

Chevron now has four business days to make another offer, Anadarko said, though that period could be extended. If Chevron doesn’t counter and the deal is terminated, Anadarko will owe it a $1 billion breakup fee.

A Chevron spokesman said it had received Anadarko’s notification and had no further comment at this time. Occidental said it is pleased that Anadarko determined that its offer was superior and looks forward to the next steps.

During a call with investors Monday, Occidental Chief Executive Vicki Hollub explained the company’s decision to raise the cash portion of its offer saying it sought to bolster its bid because Anadarko still hadn’t declared it superior to the agreement Anadarko struck with Chevron. The strategy appears to have worked.

“We saw the two options as increase the share price, or provide clarity of closing,” Ms. Hollub said during a call to discuss Occidental’s earnings. “We felt like clarity of closing was the lower cost.”

Ms. Hollub also discussed why the company no longer wanted shareholders to have to vote on its offer, saying she was trying to act in their best interest by removing a hurdle that Anadarko’s board saw as a stumbling block to a deal.

“We felt that our greater fiduciary responsibility from a governance standpoint for our shareholders was to make this deal happen,” Ms. Hollub said.

Occidental announced a revised offer of $76-a-share on Sunday, $59 of which will be cash, nearly two weeks after it countered the deal Anadarko previously struck with Chevron. The Chevron deal is now valued at about $62 a share as of Monday’s close but was initially considered superior by Anadarko’s board, despite being lower.

Ms. Hollub said that increasing the cash portion of the bid would provide Anadarko shareholders with more of an immediate return than Chevron’s offer. Raising the cash portion also allowed Occidental to avoid putting the issue to shareholders, which would have been required if it issued 20% or more of existing shares.

Some shareholders have expressed frustration they won’t have a vote on the deal. Ms. Hollub said that over months of talks with Anadarko, none of Occidental’s contemplated offers would have avoided such a vote. But, once Anadarko’s board cited the risk a vote would block the deal as a hurdle, Ms. Hollub felt Occidental had no choice but to remove the vote.

That decision may strengthen the company’s offer, but it also sets up a confrontation with some Occidental investors during the company’s annual meeting Friday. T. Rowe Price Group Inc. said last week that the deal would push Occidental into new business lines and weaken its balance sheet. The asset manager also signaled that if the transaction doesn’t come up for a vote, T. Rowe will vote against Occidental’s directors at the meeting.

Occidental also released its first-quarter earnings a day early on Sunday evening, reporting net income of $631 million, about 10% less than during the first three months of 2018. Production in its Permian Resources unit surged 47% to the equivalent of 261,000 barrels a day of oil and gas. The results beat analysts’ expectations, and Occidental shares rose 1.4% to $58.77 on Monday.

Ms. Hollub said she has been working constructively with Anadarko’s management team and that there were few remaining sticking points between the two sides.


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