Houston Chronicle by Jordan Blum June 7, 2019
Oxy's pursuit of Anadarko - two years in the making
Occidental Petroleum's pending $38 billion acquisition of Anadarko Petroleum is a nearly two-year tale of Oxy's pursuit and repeated rejection until, in May, when the two Houston-area firms finally agreed to merge.
The companies revealed Friday in a filing with the U.S. Securities and Exchange Commission that the affair was an on again, off again flirtation until February when Chevron entered the fray and quickly wooed Anadarko into a short-lived engagement. The biggest desired prize was Anadarko's prime acreage in West Texas' booming Permian Basin, where Oxy and Chevron already are the top producers.
An increasingly tense series of back-and-forth talks continued until the seemingly dramatic conclusion on April 11 when - after a night of long discussions - The Woodlands-based Anadarko agreed to a lesser but potentially safer offer from the California oil giant.
That set in motion a whirlwind bidding war that would ultimately result in Anadarko changing course and Oxy winning out in the end with a deal that included an 80 percent cash stake, an influx of funds from Warren Buffett and an agreement to sell Anadarko's Africa assets to the French energy major Total.
Houston-based Oxy is taking a big bet and assuming about $40 billion in new debt through the deal. By its own recognition, "Occidental will incur a substantial amount of indebtedness and other payment obligations in connection with the financing for the merger."
Oxy Chief Executive Vicki Hollub has said her senior vice president, Michael Ure, identified Anadarko as an ideal takeover candidate two years ago, praising the mergers and acquisitions team that made it happen.
What follows is a play-by-play as detailed in the SEC filing.
Hollub first contacted Anadarko CEO Al Walker about a potential deal in July 2017.
They met in August and continued the conversation in September 2017, initially offering close to $31 billion in an all-stock deal when the energy sector was still recovering from the most recent oil bust.
In October, Walker told Hollub he questioned the logic of deal because of the "significant differences in the two companies' asset profiles and strategies." And, in November, Oxy offered to make the deal a mix of cash and stock.
The Anadarko board met in mid-November 2017 to discuss the deal and unanimously decided to reject it, concluding that the companies' differing strategies wouldn't optimize shareholder value and that the financial risks could make it difficult for Oxy to increase or even maintain dividend payouts to investors. The board also was concerned Oxy would have to sell off a lot of Anadarko for parts in a difficult market environment in order to finance the deal.
Undeterred, in January 2018 as oil prices rebounded above $60 per barrel and the valuations of energy companies rose, Oxy made a new cash-and-stock offer of about $38 billion with up to half of the funds in cash, valuing Anadarko at about $76 per share. That offer ended up being nearly as high as the one Anadarko would ultimately accept 16 months later.
At the time, Anadarko stock was selling for more than $58 per share with a total Wall Street value of almost $30 billion.
Confident in a rebounding oil market and Anadarko's ability as a standalone company, the board again rejected the offer in February 2018.
But Walker told Hollub that an all-cash offer may win them over.
Throughout the rest of 2018, Hollub informally conveyed Oxy's ongoing interest to Walker, but any formal negotiations went dormant.
Things went quiet until February 2019 when Chevron abruptly stepped in.
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