Anadarko to cancel Chevron’s buyout

Image: African Century

Anadarko Petroleum’s board of directors announced on Monday that it intends to cancel a buyout agreement signed with oil giant Chevron – unless it proposes a counter-offer superior to that of Occidental Petroleum.

The story of Anadarko’s 2019 buyout is full of uncertainty. Last month, Chevron announced Anadarko’s acquisition as a done deal at $33 billion ($65 a share), of which 75 percent would be in stock and 25 percent in cash.

Occidental Petroleum made a subsequent offer to Anadarko reaching $38 billion ($76 a share), sweetened further on Sunday when Occidental announced the deal would be mostly cash (78 percent stock, 22 percent cash).

French-major Total came into the game on Sunday announcing it would buy Anadarko’s African assets from Occidental, under the condition that the latter would win the deal.

Warren Buffet’s investment company Berkshire Hathaway’s $10 billion preferred stock investment in Occidental is also contingent to the completion of the transaction.

On Tuesday, Anadarko’s directors judged Occidental’s offer to be a superior proposal, with the board intending to cancel the deal with Chevron to definitively move forward with Occidental Petroleum. Should Anadarko break off the agreement, the company will have to pay a $1 billion breakup fee to Chevron.

“We have long been convinced that a strategic combination with Anadarko represents a compelling opportunity for the shareholders of both Occidental and Anadarko, and we are pleased that Anadarko’s Board has determined that our May 5, 2019 offer is a ‘Superior Proposal,” stated Occidental.

Chevron has until Friday to submit a new offer, pertaining to the initial agreement. Industry analysts expect the company to bid in the low- to mid- $70 per share, to match Occidental cash-to-stock ratio which would put Chevron back in a favourable position due to Occidental’s balance sheet concerns, rendering it difficult to match an upgraded offer.

The ongoing bidding war confirms Anadarko’s assets’ attractiveness, especially in the Permian Basin, where Anadarko holds 600,000 shale-oil rich acres.