Chevron Won't Counterbid for Anadarko--3rd Update
May 09 2019 - 10:54AM
Dow Jones News
By Bradley Olson and Micah Maidenberg
Chevron Corp. is bowing out of the bidding to buy Anadarko
Petroleum Corp., setting the stage for Occidental Petroleum Corp.
to win its pursuit of a company almost its same size.
"Costs and capital discipline always matter," Chevron Chief
Executive Michael Wirth said in an interview. "An increased offer
would have eroded value to our shareholders and it would have
diminished our returns on capital."
Chevron had agreed on April 12 to purchase Anadarko for about
$33 billion, but Occidental Petroleum Corp. offered the oil company
$38 billion on April 24 and then boosted the cash portion of its
offer on Sunday.
In seeking Anadarko, both companies were focused on prized
assets in the Permian Basin in West Texas and New Mexico, the heart
of the U.S. oil boom. Occidental's emergence as the likely victor
would conclude one of the more acrimonious energy-deal sagas in
recent years.
Occidental's increasingly aggressive efforts to win in the
contest for Anadarko -- including lining up a $19 billion war chest
with Berkshire Hathaway Inc. and French oil giant Total SA --
helped Chief Executive Vicki Hollub outduel a much larger
rival.
Now, Ms. Hollub must work to win over skeptical Occidental
shareholders, some of whom have said they plan to vote against the
company's board at its annual meeting Friday.
Chevron said it expects Anadarko to terminate the companies'
merger agreement. Anadarko said Monday it considered Occidental's
offer superior to Chevron's bid and the companies are now expected
to complete the terms of the deal.
Interactions between Anadarko and Occidental have been terse,
including most recently on Sunday, when Ms. Hollub said in a letter
to Anadarko's board that she objected to its requests for three
board seats.
"We look forward to signing a merger agreement with Anadarko and
realizing value for our stakeholders as soon as possible,"
Occidental said in a statement.
Mr. Wirth said Chevron could have outbid Occidental, but instead
will take a $1 billion termination fee from the company. Chevron
also said Thursday it plans to increase its stock buyback rate by
25% to $5 billion a year.
Going forward, Mr. Wirth said Chevron would only consider an
acquisition if it is "exceptionally good." Without a deal, the
company expects to triple production in the Permian to 900,000
barrels a day of oil and gas in five years. It is now the leading
producer in the region, but a combined Occidental-Anadarko would
emerge as the top operator post-deal. He declined to comment on
negotiations.
"We prefer to do friendly deals and we prefer to negotiate them
out of the limelight," he said. "To the extent this became
something other than that, that's not the way Chevron
operates."
Occidental secured $10 billion in backing from Warren Buffett's
Berkshire Hathaway Inc. for its offer for Anadarko. The company
also agreed to sell Anadarko's Africa assets to Total for $8.8
billion in the event it completes an acquisition of Anadarko.
Both moves strengthened Occidental's financial position as it
sought to acquire a company of almost equal size.
Write to Bradley Olson at Bradley.Olson@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
May 09, 2019 10:39 ET (14:39 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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