NEW YORK • Occidental Petroleum Corp moved a step closer to sealing its proposed US$38 billion (RM157.7 billion) acquisition of Anadarko Petroleum Corp after it sweetened its offer and agreed to sell assets owned by the target company.
Occidental increased the cash portion of its bid to 78% from 50% on Sunday and pledged to cover the US$1 billion break-up fee Anadarko would have to pay for abandoning an already-agreed to deal with Chevron Corp.
The heftier buyout proposal came just hours after French energy giant Total SA agreed to buy operations in four African nations for US$8.8 billion, contingent upon Occidental completing a takeover of Texas-based Anadarko.
The Total agreement augments billionaire Warren Buffett’s US$10 billion commitment to Occidental, which has faced investor criticism for its unsolicited April 24 offer to best Chevron’s takeover of Anadarko. While Occidental is a storied name in American oil and operates across three continents, it’s just one-fifth Chevron’s market value and its pursuit of Anadarko was seen by some as quixotic.
Occidental CEO Vicki Hollub, who has been pursuing Anadarko for almost two years, has grown frustrated at the company’s unwillingness to acquiesce to her advances.
“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,” Hollub said in a letter to Anadarko’s board dated on Sunday.
Anadarko said in a statement that it will review the revised offer and reaffirmed its existing recommendation to shareholders to accept the Chevron deal.
The Total agreement may ameliorate concerns that Occidental would take on too much debt and shorten the amount of time the company would be out of the market for share buybacks, said Bill Nygren, CIO of Harris Associates LP, which manages US$120 billion and owns about 3% of Anadarko.
An Occidental-Anadarko accord would be a stunning rebuff for Chevron CEO Mike Wirth just 15 months into his tenure at the head of the world’s third-largest oil explorer by market value. Sunday’s emergence of Total as an Occidental ally pits two of the world’s supermajor oil drillers on opposite sides of the industry’s biggest takeover battle in years.
At the heart of the tug of-war over Anadarko is a fight for supremacy in the Permian Basin, the world’s largest oil patch.
Chevron announced an ambitious, multibillion-dollar plan earlier this year to boost its fracking activities in the region, and buying Anadarko would turbo-boost its Permian growth. For Occidental, the deal is about securing its position as the dominant producer in the basin.
Buying Anadarko would be the biggest oil industry deal in four years and mark an end to an era of austerity among explorers chastened by a decline in crude prices and chastised by investors for poor returns.
The pressure on Occidental and Chevron shares in the past two weeks showed investors were worried the industry was returning to the old ways, when profligate spending and bold deals were de rigueur.
Indeed, the controversy stirred up by Occidental’s bid appears to have attracted another interloper.
Billionaire activist investor Carl Icahn has built a small stake in the company, people familiar with the matter said last Friday. Occidental shares rose in after-market trading on news of his involvement. — Bloomberg