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By Bradley Olson
Occidental Petroleum Corp. revised its offer for Anadarko Petroleum Corp., increasing the cash portion of its bid and removing any requirement for a shareholder vote as the company seeks to best Chevron Corp. in a contest for prized assets in the heart of the U.S. oil boom.
The revised offer of $76-a-share, $59 of which will be cash, significantly raises the stakes for Anadarko as it weighs a previous deal it struck with Chevron that is now valued at slightly less than $62 a share as of Friday's close.
Occidental Chief Executive Vicki Hollub expressed frustration with Anadarko's board in a letter Sunday that suggested growing tension between the two companies.
"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," she wrote. Occidental also objected to demands by Anadarko for three board seats as part of a deal.
Spokesmen for Chevron and Anadarko didn't immediately respond to requests for comment. Chevron previously has said its deal "provides the best value and the most certainty to Anadarko's shareholders." Anadarko's board is currently weighing Occidental's offer.
While Ms. Hollub's decision to remove a shareholder vote may strengthen the company's offer, it also sets up a confrontation with some Occidental investors who have publicly expressed concerns about the costs of the company's push for Anadarko, which holds prime acreage in the Permian Basin of Texas and New Mexico.
Earlier on Sunday, Occidental also said that it had reached a contingent agreement to sell Anadarko's assets in Africa to French oil giant Total SA for $8.8 billion if it completes a deal for the company. The assets, which would sell for $8.8 billion, include Anadarko's multibillion-dollar Mozambique project and other developments in Algeria, Ghana and South Africa.
Occidental previously had disclosed plans for roughly $10 billion to $15 billion in asset sales following a deal for Anadarko, as it seeks to decrease the added leverage on its balance sheet that would come with a purchase of a company only slightly smaller than itself.
The revised offer and potential transaction with Total marked two additional steps by Occidental to shore up its bid for Anadarko, after the company last week received $10 billion in backing for the potential deal from Warren Buffett's Berkshire Hathaway Inc.
If Occidental's proposed acquisition of Anadarko goes through, Berkshire will receive 100,000 preferred shares in Occidental that pay an 8% annual dividend and a warrant to purchase $5 billion in Occidental common stock.
The Berkshire funds made it possible for Occidental to avoid a shareholder vote on the transaction. If Occidental issues less than 19.9% of its existing shares, no vote is required. While Occidental has signaled that it believes it could win shareholder support, the company still moved to do the deal in an effort to strengthen its offer. Anadarko's deal with Chevron doesn't require the approval of Chevron shareholders.
Some Occidental shareholders have expressed concerns about the transaction and the potential that they won't have a say on the deal. T. Rowe Price Group Inc. said last week that the deal would push Occidental into new business lines and weaken its balance sheet. The asset manager also signaled that if the transaction doesn't come up for a vote, T. Rowe will vote against Occidental's directors at its annual meeting May 10.
Chevron and Occidental have both seen their shares decline as the push to win Anadarko continues, a factor that has brought down the value of a potential transaction from either party. Chevron is down about 7% since April 11, and Occidental is down about 15% since then.
Occidental's revised offer is worth 23%, or about $7 billion, more than Chevron's as of Friday's closing price. Under the April 12 deal with Chevron, Anadarko shareholders would receive 0.3869 share of the San Ramon, Calif., oil company and $16.25 in cash for each Anadarko share. That was $65-a-share on April 12 but has since fallen to $61.62 a share for a total value of $30.93 billion as of Friday's close.
For Occidental's new proposal, Anadarko shareholders would receive $59 in cash and 0.2934 shares of Occidental. That equals the original $76-a-share value of Occidental's initial public offer on April 24, when the company made its bid public.
Cara Lombardo contributed to this article.
Write to Bradley Olson at Bradley.Olson@wsj.com and Cara Lombardo at firstname.lastname@example.org
(END) Dow Jones Newswires
May 05, 2019 20:46 ET (00:46 GMT)
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