Anadarko Petroleum will cancel its buyout deal with Chevron after the company’s board of directors agreed that the offer presented by Occidental Petroleum was a better one.
Occidental submitted a revised offer for the oil company on Sunday, with its $38billion buyout now deemed superior to the $33 billion Chevron is offering.
An earlier deal had seen Anadarko and Chevron -agree the deal for $65 per share, but Occidental appears to have hijacked that with its $76 per share offer revised on Sunday to include an offer to pay for most of the shares in cash.
While Occidental’s revised bid structures the payout as 78% cash and 22% stock, Chevron’s provides for a 75% stock and 25% cash.
The bidding war that has ensued now leaves Chevron with a window of four days in which to offer a counter deal to that of Occidental. Anadarko offers the interested companies access to top industry assets in key locations as the Permian Basin in the United States, the Gulf of Mexico, and Africa.
But Anadarko’s decision to designate the rival bid as “superior” means it will have to either abandon the earlier deal with Chevron or accept its counter offer.
Analysts have noted that Chevron is likely to make offer a counter bid that would range somewhere between $70 to $76 per share and try to match the cash-to-stock ratio Occidental promised in its revised bid.
Such an offer would leave Occidental little room to maneuver another revision given its smaller budget.
A week ago, Occidental Petroleum secured a $10 billion backing from Warren Buffet through his Berkshire Hathaway investments. And on Sunday, the company also announced having struck a deal with Total for Anadarko’s assets located in Africa for a reported $8.8 billion.
Anadarko will pay Chevron $1 billion to abandon the initial agreement should it find the company’s counter offer inferior or if Chevron does not counter by Friday.
In the morning trading session, Occidental Petroleum shares dropped just slightly, while the price of Chevron’s stock had an uptick in after-hours trading. The Anadarko share price remained rather flat following its impressive 3.8% jump experienced on Monday.