Occidental Revamps Its Bid for Anadarko -- WSJ
May 06 2019 - 3:02AM
Dow Jones News
By Bradley Olson
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 6, 2019).
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.
In a statement, Anadarko said it is reviewing the offer and that
its board and management team has been "actively engaged throughout
the entirety of this process."
A spokesman for Chevron referred questions to Anadarko. 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.
Occidental also released its first-quarter earnings a day early
on Sunday evening, reporting net income of $631 million, about 10%
less than during the first three months of 2018. Production in its
Permian unit surged 47% to the equivalent of 261,000 barrels a day
of oil and gas. The results beat analysts' expectations. Occidental
is scheduled to have a conference call about the earnings at 8 a.m.
EDT Monday.
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 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
(END) Dow Jones Newswires
May 06, 2019 02:47 ET (06:47 GMT)
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