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May 7, 2019, 11:57 a.m. EDT

Occidental steals Chevron’s thunder in battle for Anadarko

But don’t count Chevron out of the takeover ring yet

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By Claudia Assis, MarketWatch


Bloomberg News/Landov
The silhouette of a contractor is seen walking up stairs at an Anadarko Petroleum Corp. oil rig site in Colorado in 2014.

Occidental Petroleum Corp. has sweetened its bid for Anadarko Petroleum Corp., and Wall Street is now leaning toward Occidental in the battle with Chevron Corp.

Occidental /zigman2/quotes/207018272/composite OXY +1.80%  on Sunday changed the mix of its cash and stock offer for Anadarko  to $59 a share in cash, upsizing the cash part. The previous offer was a 50/50 cash-and-stock offer.

Shares of Anadarko, Chevron /zigman2/quotes/205871374/composite CVX -1.33% , and Occidental were the top three gainers Monday among energy companies on the S&P 500 index. /zigman2/quotes/210599714/realtime SPX -1.51%  

The shares turned lower on Tuesday, tracking the broader market on ongoing worries about tariffs on Chinese-made goods.

Occidental’s tweak, which implies the creation of new Occidental shares, would also bring the deal to under 20% of Occidental’s existing shares, thus eliminating the need for shareholder approval. Opposition to the deal had grown among Occidental shareholders.

That was a “high-risk, high-reward strategy” by Occidental in order to cinch the deal for Anadarko, which also included Occidental entering a deal to sell African assets to France’s Total SA /zigman2/quotes/201824152/composite TOT -10.20%  for $8.8 billion assuming the Anadarko deal goes through.

“In our view, this raises the chances that (Occidental) will prevail, barring a major revamp of (Chevron’s) offer,” said Stewart Glickman, an analyst with CFRA. Chevron’s bid offers a lower cash portion, 25%, and lower price.

Anadarko later Monday said its board had unanimously determined that Occidental’s revised proposal meets the definition of a “superior proposal” on Anadarko’s merger agreement with Chevron. It has notified Chevron that it intends to terminate the agreement. Chevron has until Friday to make a counteroffer.

To cinch the deal Occidental needs about $30 billion in cash, and the agreements with Total and Warren Buffett’s Berkshire Hathaway Inc., announced earlier, have yielded about $18.8 billion, “so we see a return to debt markets as likely,” Glickman said.

“The newly upsized (75%) cash component of Occidental’s bid, along with the contingent African asset divestment to Total, have improved Occidental’s odds of ’winning’, though Chevron is still not out of the game,” analysts at Raymond James said in a note Monday.

Chevron first bid for Anadarko last month, with Occidental entering the fray later. At play are Anadarko’s shale holdings, especially in Texas’ Permian Basin, as well as deep-water and liquefied natural gas projects.

Related: Chevron-Anadarko deal lifts shale stocks, could herald wave of energy M&A

Occidental earlier Monday beat Wall Street expectations for its first quarter, reporting profit of 84 cents on sales of $4 billion in the quarter. That compared with expectations of earnings of 73 cents a share on sales of $3.9 billion.

Shares of Occidental have lost nearly 25% in the last 12 months, contrasting with gains of more than 9% for the S&P.

/zigman2/quotes/207018272/composite
US : U.S.: NYSE
$ 13.00
+0.23 +1.80%
Volume: 92.06M
April 3, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
3.38%
Market Cap
$11.64 billion
Rev. per Employee
$1.60M
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/zigman2/quotes/205871374/composite
US : U.S.: NYSE
$ 75.11
-1.01 -1.33%
Volume: 14.91M
April 3, 2020 6:30p
P/E Ratio
50.48
Dividend Yield
6.87%
Market Cap
$141.16 billion
Rev. per Employee
$3.27M
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,488.65
-38.25 -1.51%
Volume: 3.59B
April 3, 2020 5:10p
loading...
/zigman2/quotes/201824152/composite
US : U.S.: NYSE
$ 35.67
-4.05 -10.20%
Volume: 3.76M
April 3, 2020 6:30p
P/E Ratio
8.39
Dividend Yield
N/A
Market Cap
$92.26 billion
Rev. per Employee
$1.87M
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Claudia Assis is a San Francisco-based reporter for MarketWatch. Follow her on Twitter @ClaudiaAssisMW.

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