In an escalating bidding war, Anadarko Petroleum said Monday it intended to reject its first suitor in a takeover bid, Chevron, after Occidental Petroleum came forward with a better offer.
The announcement by Anadarko’s board, a day after Occidental sweetened its bid with more cash, is far from a final decision. Chevron will now have four days to improve its offer, after which Occidental would have several days to revise its bid.
The sale of Anadarko will be the largest deal in the global oil industry in three years and establish a dominant producer in the Permian Basin of Texas and New Mexico, the most productive oil field in the world.
In a statement Monday evening, Anadarko said it “intends to terminate the Chevron merger agreement in order to enter into a definitive merger agreement with Occidental in connection with the revised Occidental proposal.”
Occidental has made four offers for Anadarko in the last two years, but the bidding war began in earnest two weeks ago when Occidental proposed a $38 billion takeover, several billion dollars more than Chevron’s bid.
Over the last week, Occidental won a $10 billion investment from Warren Buffett’s Berkshire Hathaway to help finance the acquisition. Then Sunday, Occidental said it had lined up a sale of Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total, the French oil company, for $8.8 billion.
In a twist Sunday night, Occidental raised the cash portion of its proposed acquisition of Anadarko to 78%, from 50%, further increasing the pressure on Anadarko and Chevron. Anadarko’s board said it still preferred a deal with Chevron but kept the door open to further negotiations.
The primary prize in the bidding war is Anadarko’s 600,000 acres of shale-oil holdings in the Permian Basin. Industry experts say those parcels are among the most lucrative in the United States.
Occidental on Monday night welcomed Anadarko’s decision. In a statement, it said, “We have long been convinced that a strategic combination with Anadarko represents a compelling opportunity for shareholders of both Occidental and Anadarko.”
T. Rowe Price, Occidental’s sixth-largest shareholder, reacted strongly against the deal Monday by saying it would vote against the company’s board of directors at its annual meeting Friday. The firm, which also holds shares in Anadarko and Chevron, said such a complex deal should have first earned the support of investors.