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(Bloomberg) – It's harder and harder for Anadarko Petroleum Corp. to justify the continuation of the acquisition of Chevron Corp. $ 30.9 billion as its shares gain after higher bid from Occidental Petroleum Corp.
On Friday, the day most US oil companies fell following a massive sell-off in the crude oil market, Anadarko extended its recent rise to almost 8% above the value of Chevron's cash proposal. This is what drives Anadarko to break its merger agreement with Chevron and open up to higher bids in a real bidding war.
The Anadarko board must decide whether the Western bid is "reasonably likely to result in a superior bid", according to the merger agreement. With a gap of $ 14 per share between the two offers, the Western bid could meet this standard. It also means that Chevron may have to increase its bid to stay in the running, according to Morgan Stanley analyst Devin McDermott.
"We think it's finally Chevron-Anadarko, even though the offer is higher," he said. However, because of the higher risks associated with Occidental's proposal, "we do not think Chevron should be up to the task," he said.
Anadarko is one of the largest independent American oil producers and has been speculating on mergers for some time; a takeover would be the largest oil transaction in at least four years. The company's operations span three continents, but the true price is its US assets, particularly those located in the prolific Permian Basin, West Texas and New Mexico, where production is skyrocketing and industry players are consolidating.
If Anadarko's board decided that Western's bid might be the best of both, Chevron has four days to come back with a counter-offer, according to Morgan Stanley. If Chevron then raises its price, Occidental has three days to respond to a new proposal.
A representative of Anadarko declined to comment on the jury's response. Chevron spokesperson Kent Robertson declined to speculate on the company's next steps and recalled CEO Mike Wirth's comments at Friday's teleconference that she remains confident in the deal. completion of the transaction.
The situation poses a dilemma for Wirth: sticking to its current offering and Chevron could eventually lose Anadarko, which would provide the major oil company with a growth in its output over the next ten years. But accumulating more liquidity risks damaging the reputation of hard-won financial discipline.
During the teleconference held to discuss the company's first quarter earnings report, Wirth dismissed analysts' questions about his intentions and said the ball was firmly in the Anadarko camp. He declined to say he would raise the offer, although Chief Financial Officer Pierre Breber opened the door to a change in the terms of the deal.
D.E. Shaw
"Obviously, we have the capacity to have alternative structures, we could invest more if that was what Anadarko wanted to do," he said, noting that the Anadarko board had already approved the current split of 75 to 25% of the shares. Occidental offers a 50/50 split.
The shares of Anadarko have traded almost daily above the value of Chevron's offer since the deal was announced on April 12. The difference was $ 11.24 at the close on Friday. This creates investor pressure. New York-based investment firm D.E. Shaw has urged the company to set up a free-sale process, people familiar with the topic said this week.
Anadarko said he was evaluating the offer of the West, but so far he has not commented on the merits of the offers. Some analysts have suggested that Occidental could have been dismissed, fearing that his proposal would be too risky, given its size, and that she would pay with her own actions, which could drop once the next year. announcement of an agreement.
"Curse of the winner"
But despite some initial warnings, the Western stock did not crack. Shares are down 8.8% since its bid was first announced on April 12, compared to a 7.1% drop for Chevron.
Chevron's shareholders do not want Wirth to repeat the past mistakes of many other Big Oil executives, where they signed major contracts that generated poor returns.
"We do not want this to turn into a bidding war where you match the match," said Noah Barrett, an energy analyst at Janus Henderson, who manages $ 328 billion, including Chevron shares, Occidental and Anadarko. "In the end, you could end up with the winner's curse."
To contact the reporters on this story: Kevin Crowley in Houston at [email protected]; Rachel Adams-Heard in Houston at [email protected]
To contact the editors in charge of this story: Simon Casey at [email protected], Joe Carroll
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