Occidental directors to contend with investors after winning Anadarko bid

By Kevin Crowley, Scott Deveau and Caleb Mutua on 5/9/2019
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Photo: Vicky Hollub, president and CEO, Oxy.

HOUSTON and NEW YORK (Bloomberg) -- Occidental Petroleum Corp. CEO Vicki Hollub persuaded the world’s fourth-richest person and one of Europe’s biggest oil explorers to help back her $38 billion bid for Anadarko Petroleum Corp. Convincing shareholders may be a whole lot harder.

Although the proposed acquisition doesn’t need formal approval from investors, shareholders are expected to turn Friday’s annual general meeting into a proxy referendum on the deal. At least one major investor -- T. Rowe Price Group Inc. -- plans to vote to oust Hollub and the eight other directors seeking re-election.

The timing of the meeting is uncomfortable for Hollub after the Houston-based oil producer outbid Chevron Corp., stretching Occidental’s finances and upsetting some investors. Chevron abandoned its $33 billion bid on Thursday and said it will collect a $1 billion breakup fee from Anadarko. Occidental’s shares fell as much as 6.8% to a 10-year low and were down 6.1% to $56.52 at 2:11 p.m. in New York trading.

In an effort to make Occidental’s bid more competitive, Hollub agreed to take on a $10 billion investment from billionaire Warren Buffett last month, and increased the cash portion of her bid to avoid the need for a shareholder vote.

The financing -- contingent on Occidental reaching a deal -- comes with a hefty price tag, with Buffett to receive 100,000 preferred shares that will accrue dividends of 8% annually. That’s a substantial premium to the average 3.8% coupon on about $10.4 billion of outstanding debt, according to data compiled by Bloomberg. She also agreed to sell Anadarko’s assets in four African nations to Total SA for $8.8 billion, contingent on Occidental acquiring the company.

‘No Choice’

T. Rowe Price said Thursday it intends to vote against the board at the meeting because Hollub and her team restructured their Anadarko bid to remove the need for a separate vote on the deal. T. Rowe Price is Occidental’s seventh-biggest investor, according to data compiled by Bloomberg. “Given the fact that the Occidental management team has refused to put this to a shareholder vote, we feel like we’re left with no choice” said John Linehan, a T. Rowe portfolio manager.

Two prominent shareholder advisory firms -- Institutional Shareholder Services Inc. and Glass Lewis & Co. -- have urged investors to support the proposal. They both noted that under its current structure, no single shareholder could act unilaterally to call a special meeting at the proposed threshold. The meeting will be held at Occidental’s conference plaza in Houston at 9:00 a.m. CST. Both ISS and Glass Lewis recommend shareholders vote for the company’s slate of directors, including Hollub.

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