Anadarko Petroleum‘s board of directors said on Monday that Occidental Petroleum‘s buyout offer is superior to its agreement to sell its business to Chevron, putting the deal with the oil giant in jeopardy.
The reversal marks the latest twist in a rare bidding war in the oil and gas sector. Chevron now has four days to counter Occidental’s latest bid for Anadarko, an oil and gas driller with prized assets in the U.S. Permian Basin, the Gulf of Mexico and Africa.
Chevron reached an agreement last month to buy Anadarko for $33 billion, or $65 a share. Shortly after, Occidental offered $38 billion, or $76 a share. Occidental on Sunday sweetened its bid by offering to pay mostly cash for Anadarko, after earlier structuring the transaction as a 50-50 cash-and-stock deal.
Anadarko’s board of directors on Monday unanimously decided that the revised offer is a “Superior Proposal” under the terms of its agreement with Chevron. The board intends to cancel the deal with Chevron and enter into a definitive agreement to sell its business to Anadarko.
According to that agreement, Chevron has the right to put another offer on the table through Friday. If Chevron does not make an offer, or if its revised proposal is rejected, then Anadarko must pay Chevron a $1 billion breakup fee.
Many analysts previously said Chevron likely didn’t have to match Occidental’s higher bid because it is the favorite to takeover Anadarko. Chevron’s global operations better dovetail with Anadarko’s international, and with a far larger balance sheet than Occidental boasts, the oil major can more easily digest an acquisition of this size.
However some analysts believe Chevron will now have to match Occidental’s bid after the company secured financing for the transaction and removed obstacles to closing the deal.
Last week, Occidental secured a $10 billion preferred stock investment from Warren Buffett‘s Berkshire Hathaway. On Sunday, Occidental announced it had struck a deal to sell Anadarko’s assets in Africa to French oil major Total for $8.8 billion.
Both arrangements are contingent on Occidental completing its acquisition of Anadarko and would fund the 78% cash component of the deal.
Here’s the board’s full statement:
Anadarko Petroleum Corporation (NYSE: APC) today announced that its board of directors, in consultation with its financial and legal advisors, has unanimously determined that the revised acquisition proposal it received from Occidental Petroleum Corporation on May 5, 2019 (the “Revised Occidental Proposal”) constitutes a “Superior Proposal” as defined in Anadarko’s previously announced merger agreement with Chevron Corporation (the “Chevron Merger Agreement”).
Under the terms of the Revised Occidental Proposal, Occidental would acquire Anadarko for consideration consisting of $59.00 in cash and 0.2934 of a share of Occidental common stock per share of Anadarko common stock. Occidental has obtained committed financing for the entire cash portion of the aggregate transaction consideration, and completion of the transaction will not require or be conditioned upon the receipt of any vote or other approval by Occidental’s stockholders.
Anadarko has notified Chevron that (i) Anadarko’s board of directors has unanimously determined that the Revised Occidental Proposal constitutes a “Superior Proposal” and (ii) after complying with its obligations to Chevron under the Chevron Merger Agreement, Anadarko intends to terminate the Chevron Merger Agreement in order to enter into a definitive merger agreement with Occidental in connection with the Revised Occidental Proposal.
Pursuant to the Chevron Merger Agreement, Chevron has the right, during the four business day period ending on May 10, 2019, which may be extended in accordance with the terms of the Chevron Merger Agreement, to propose revisions to the terms of the Chevron Merger Agreement, or to make another proposal. Anadarko is required to, and will, make its representatives reasonably available to negotiate with Chevron during this period with respect to such proposed revisions or other proposal, if any.
If Anadarko terminates the Chevron Merger Agreement in order to enter into a definitive agreement with respect to the Revised Occidental Proposal, Anadarko will pay Chevron a $1 billion termination fee as required by the Chevron Merger Agreement. The Chevron Merger Agreement remains in effect unless and until terminated, and accordingly, Anadarko’s Board of Directors reaffirms its existing recommendation of the transaction with Chevron at this time.