The bidding battle for Anadarko
In an interesting twist of events, on May 6, 2019, Anadarko Petroleum’s (APC) board of directors determined a revised bid from Occidental Petroleum (OXY) to be superior to that of Chevron (CVX). Let’s review both bids in more detail.
As per Chevron’s bid, Anadarko’s shareholders are expected to receive 0.3869 shares of Chevron and $16.25 in cash for each APC share. Chevron will issue ~200 million shares. In all, Anadarko shareholders will receive $62.1 per share (including the value of Chevron’s shares on May 6).
Occidental’s revised bid
Occidental submitted a revised bid to Anadarko on May 5, 2019. As per the bid, Occidental will pay $59 in cash and 0.2934 shares of OXY for each APC share. If we consider the closing price of Occidental stock on May 6, then Anadarko shareholders will receive $76.2 per share, which represents a 23% premium over Chevron’s bid (considering Chevron’s share price on May 6). The company also stated that it had committed financing for the cash portion of the deal’s value. The transaction was also not conditional on any approval or voting from Occidental’s shareholders.
Anadarko has informed Chevron about Occidental’s superior bid, and Chevron must reply to Anadarko by May 10. Chevron can either revise its existing terms or offer a new proposal. It will be interesting to see how Chevron responds to Anadarko considering the fact the deal could strengthen its upstream portfolio, bring in huge synergies, and enhance its financials.
If Anadarko terminates its merger agreement with Chevron, then it will have to pay a $1 billion termination fee to Chevron. Following the termination, Anadarko can enter into a merger agreement with Occidental.