Anadarko to seek Chevron bid at least matching rival

By Rachel Adams-Heard and Kevin Crowley on 5/9/2019

HOUSTON (Bloomberg) -- Anadarko Petroleum is looking for a revised takeover offer from Chevron that matches or exceeds the $38 billion proposal from Occidental Petroleum, according to people familiar with the matter who asked not to be named because the information isn’t public.

The board on Monday deemed the Occidental takeover bid “superior” to a $33 billion proposal it accepted last month. That gives Chevron until May 10 to increase its bid, seek an extension or walk away from the industry’s biggest deal in at least four years. The company has yet to say what action it will take, and a spokesman didn’t immediately respond to request for comment on Wednesday. Anadarko declined to comment.

“It would be foolish for Chevron to assume they could come underneath the Occidental bid,” said Bill Nygren, chief investment officer of Harris Associates, which manages $120 billion and owns about 3% of Anadarko. “We would fully expect the Anadarko board to accept the highest offer, and if that wasn’t the outcome, we would be very vocal in our dissent.”

Anadarko’s board accepted the original Chevron bid even though it had the higher offer from Occidental on the table. The Woodlands, Texas-based company was concerned about Occidental’s ability to get shareholder approval for its offer and about the amount of cash versus stock. Occidental on May 5 issued a revised proposal that boosted the cash portion and removed the need for a shareholder vote.

Analysts have said there is room for Chevron to increase its bid. The company probably needs to raise it from $65 to $70 or $72 a share to stay in the running but doesn’t need to surpass Occidental’s bid because its stock is a more valuable currency, Lysle Brinker, executive director of companies and transaction research at IHS Markit, said on Tuesday.

Anadarko would be the largest deal of Chevron CEO Mike Wirth’s 15-month tenure and be the biggest transaction in the oil industry in four years. A new offer from Chevron would also make the tussle for Anadarko one of the most contested takeovers in years for the U.S. oil patch, where bidding wars are unusual.

The Permian Basin of West Texas and New Mexico is key to Anadarko’s appeal. Chevron and Occidental both see acquiring the driller as a way to bulk up their positions in the region, where production has more than doubled since 2015.

Shares of Anadarko were untraded in the pre-market in New York. Occidental dropped 0.7% to $59.80 and Chevron was little changed at $117.34.

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