Update: Anadarko just made it official...though its pact with Chevron does remain 'in effect'...at least for now.
- ANADARKO BOARD DETERMINED OCCIDENTAL PROPOSAL MAY BE `SUPERIOR'
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Handing a rare victory to a hostile bidder, and what would be a serious coup for Occidental CEO Vicki Hollub if the deal goes through, Anadarko Petroleum is reportedly preparing to endorse a bid from Occcidental Petroleum, which launched a hostile campaign for Anadarko and its valuable shale assets after the driller accepted a bid from energy giant Chevron.
Reuters broke the news overnight that Anadarko would pursue deal talks with Occidental, with the FT taking the story a step further and confirming that Anadarko was preparing to endorse the hostile bid. BBG soon confirmed.
Anadarko, a Woodlands, Texas-based oil and gas company, is expected to make a statement this week after its board determined that a cash and stock offer from Occidental would be superior to the deal with Chevron. If Anadarko follows through, Chevron will be given a chance to launch a counter-bid, though anonymous sources quoted by BBG contend that there's little appetite at Chevron for a higher bid. If Chevron does lose out, Anadarko will need to pay it a $1 billion break-up fee, per the terms of their deal agreement. The FT previously reported that Chevron has already once refused to raise its bid.
For its part, Chevron declined to answer a question during its earnings call on Friday about how it would respond should Anadarko’s board favor Occidental’s proposal. However, Chevron’s CFO, Pierre Breber, said Chevron had the ability to up its offer, though the company has expressed unwillingness to become embroiled in a protracted bidding war.
Occidental, one of the five largest American oil and gas firms, made a cash-and-stock offer worth $76 per share to Anadarko shareholders, a 22% premium to the bid from Chevron, which is worth roughly $63 per share.
Another apparent advantage for Occidental: its bid was evenly split in cash and stock. Chevron offered to pay 0.39 of its own stock and $16.25 in cash for each share of Anadarko outstanding.
"This is much more synergistic for us than any other company that might look at this," Hollub told the FT last week.
Though to be fair, Anadarko's assets would be a valuable addition to the portfolio of any American energy firm. The company owns valuable shale oil acreage (roughly a quarter million acres) in the Permian, where low-cost drilling techniques can produce supplies for decades, as well as assets in the Gulf of Mexico and a natural gas project in Mozambique. Overcoming analyst warnings that they didn't see how she could outbid her larger rival, Hollub started looking into a counteroffer minutes after news about the Chevron bid broke. To make the deal more palatable to shareholders, she has promised to sell off assets worth $16.5 billion.
Still, the deal isn't done yet; in fact, the real work is just beginning as the two companies start to talk through the terms of a deal.
If a bidding war breaks out, it would unfold against a backdrop of a rally in oil prices that has sent President Trump scrambling to browbeat OPEC and American rivals to pump up production.