Occidental makes US$38-billion offer for Anadarko Petroleum, besting Chevron bid

  • Occidental makes US$38-billion offer for Anadarko Petroleum, besting Chevron bid

Occidental makes US$38-billion offer for Anadarko Petroleum, besting Chevron bid

Occidental Petroleum launched a campaign on Wednesday to buy Anadarko Petroleum in a hostile takeover, challenging Chevron's proposed acquisition in a battle over key USA shale assets. The world's fast-growing oil major patch, the Permian has helped to turn the US into a net exporter and become a bigger producer that Saudi Arabia.

According to reports, Occidental had already made a higher $70 a share offer for Anadarko that was rejected by the board in favour of Chevron's approach. That is well above Chevron's $65-per-share offer, worth $50 billion including debt, and would make an Occidental-Anadarko deal the fourth-largest in terms of oil production. The area has been central to the USA energy revival over the last decade. "Chevron will fight because acreage in Permian fits so well with its existing acreage, increasing the potential for better-than-expected operational synergies".

The cash-and-stock offer from Houston-based Occidental would be the richest oil-industry takeover in four years, and shows the imperative among the sector's largest players to grab larger chunks of the Permian shale basin in Texas and New Mexico, site of a spending boom.

"The Anadarko board expects to respond to Occidental's proposal upon completing its review, and accordingly reaffirms its existing recommendation of the transaction with Chevron at this time".

"It is unfortunate that Anadarko agreed to pay a break up fee of $1 billion, representing approximately $2 per share, without even picking up the phone to speak to us after we made two proposals during the week of April 8", Hollub wrote in a letter to Anadarko's board on Wednesday. Occidental said it has completed its due diligence on the deal and has financing lined up with Bank of America Merrill Lynch and Citigroup Inc.

"The scale and depth of our company combined will allow us to grow production at a lower rate while increasing our dividend and adhering to our strong commitment to capital discipline", Hollub said on a conference call Wednesday. "There are some producers in the Permian where it would be really hard to pay the purchase price and get any synergies at all".

Buying Anadarko would prevent Occidental from losing its position as the number one producer in the Permian to Chevron Corp., which is now the second-largest.

It said it had boosted the cash portion of its offer to 50 percent, up from earlier offers. Chevron's proposal is 25 per cent cash and 75 per cent stock. When the deal was announced it was worth US$65 a share. Furthermore, breaking up the Chevron merger would mean Anadarko paying a $1 billion termination fee.

The latter said it was repeatedly spurned by Anadarko despite offering more money in the period just before the Chevron deal was sealed.

But JPMorgan Chase said in a note that Occidental's overall targets suggested the smaller company could be the more efficient producer, adding that "we would not be surprised if Chevron raised its bid". In an April 2016 interview at the company's Permian headquarters in Midland, Texas, she made no bones about her plans to snap up rivals to expand Occidental's portfolio in what has since become the world's biggest oil field.