Oil and gas producer Occidental Petroleum on Wednesday made a $57 billion (€50.9 billion) bid for Anadarko, topping Chevron's $50 billion offer and setting up the first hostile takeover battle for a major oil company in years.
The surprise $76-per-share bid comes after Occidental had been trying to woo Anadarko and had made two other proposals since late March. A deal would make Occidental the largest producer of oil in west Texas’s Permian basin, where production has boomed in recent years.
The bid pushed Anadarko shares up more than 14 per cent in premarket trading to $73, well above the $65 per share offered by Chevron. Occidental shares fell about 6 per cent to $58.73.
Occidental boosted the cash portion of its offer to 50 per cent, up from two earlier offers. Chevron’s offer comprised 25 per cent cash and 75 per cent stock.
A deal would boost Occidental’s production in the lucrative Permian to 533,000 barrels of oil equivalent production per day, the company said.
"We've studied this very diligently," said Vicki Hollub, Occidental's chief executive, adding the deal would boost cash flow and allow Occidental to raise its dividend over time. "We're the partner of choice," she said.
Still, Occidental has lost 7 per cent of its value since it first disclosed its interest in Anadarko.
"This is not a smart move on part of Occidental given the difference of size between the two companies," said Raymond James analyst Muhammed Ghulam.
"Chevron is much bigger and has the resources to combine the two companies, and has significant deep water experience," Mr Ghulam said, referring to Anadarko's deep water Gulf of Mexico assets.
Lower costs
A merger would help lower costs for Anadarko's shale operations in Texas and Colorado, boosting returns. Occidental also brings project management expertise to assure Anadarko's liquefied natural gas project in Mozambique gets built on time and on budget, Ms Hollub said.
Anadarko plans to reply to the offer today, a spokesman said.
In a letter to Anadarko’s board, Occidental described two prior purchase proposals, each of “significantly higher value” than that made by Chevron. Its offer would require shareholder votes by Occidental and Anadarko holders.
Anadarko would also be liable to pay Chevron a $1 billion break-up fee if its board chooses Occidental’s offer.
“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 8th,” Ms Hollub wrote in a letter to Anadarko’s board on Wednesday.
Analysts have said they expect the industry to consolidate more as small oil producers, who revolutionized the sector through advances in horizontal drilling and hydraulic fracking, have had to cut spending as investors press for higher returns and their stock prices languish.
The Permian produces about 4 million barrels per day, and is expected to hit 5.4 million bpd by 2023, according to IHS Markit, more than the total production of any OPEC country other than Saudi Arabia.
Occidental’s $76 per share offer comprises $38 in cash and 0.6094 of its shares. The offer represents a premium of 19 per cent to Anadarko’s closing price on Tuesday and 62 per cent to the closing price on April 11th, the day before Chevron made its bid.
Under Chevron’s $65 per share bid, Anadarko shareholders are set to receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. – Reuters
