Anadarko Petroleum (Anadarko) has announced that it has entered into a definitive merger agreement with Occidental Petroleum (Oxy) in a deal valued at $57 billion after Chevron decided not to increase its offer.
Under the deal with Oxy, it will acquire all of the outstanding shares of Anadarko for US$59.00 in cash and 0.2934 of a share of Occidental common stock per share of Anadarko common stock. The deal is set to close in the second half of 2019, subject to approval by Anadarko shareholders, regulatory approvals and other customary closing conditions.
“This exciting transaction will create a global energy leader with a world-class portfolio, proven operational capabilities and industry leading free cash flow metrics,” said Vicki Hollub, president and chief executive officer of Occidental. “This transaction further establishes Occidental as a premier operator in prolific global oil and gas regions with the ability to deliver production growth of 5 per cent through investment in projects with industry-leading returns. With greater scale, an unwavering focus on driving profitable growth, and our commitment to growing our dividend, we are creating a unique platform to drive meaningful shareholder value.”
Oxy said in a statement that is has the financing for the entire cash portion of the deal, and completion of the transaction will not require any vote or other approval by Oxy's stockholders.
Al Walker, chairman and chief executive officer of Anadarko, commented: "We are pleased to have reached an agreement with Occidental that delivers significant, near-term value to our shareholders. We are proud of the substantial premium we have delivered to our shareholders and look forward to working with Occidental to ensure a smooth transition."
Anadarko said that it has terminated its previously announced merger agreement with Chevron and has paid a termination fee of $1 billion to Chevron.
Chevron said it would not increase its offer to acquire Anadarko and Chevron’s Chairman and CEO Michael Wirth explaine:"Winning in any environment doesn’t mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal. Our advantaged portfolio is driving robust production and cash flow growth, higher investment returns and lower execution risk. We are well positioned to deliver superior value creation for our shareholders.”
Chevron said in a press statement that commitment after the termination of the deal and receiving the $1 billion it plans to increase its share repurchase rate by 25 per cent to $5 billion per year.
Greig Aitken, director of M&A Research at Wood Mackenzie, said, "Anadarko represented a fantastic opportunity for Chevron, but it wasn't crucial in a portfolio sense. Chevron wields an enviable growth profile among the Majors. It is already a leader in US tight oil, underpinned by its low-royalty, contiguous acreage position throughout the Permian."
He added: "We thought Chevron had room to up its offer without destroying value – and in oil and gas M&A, that's generally an achievement for any buyer. But it looks like Chevron wasn't content with just breaking even."