By David French
(Reuters) – Occidental Petroleum Corp increased the cash component of its $38 billion (29 billion pounds) bid to acquire Anadarko Petroleum Corp on Sunday, removing a requirement for any deal to receive the approval of Occidental’s shareholders.
The move means Occidental shareholders who oppose the bid, including T Rowe Price, will not get an opportunity to vote it down. It adds more certainty to the offer for Anadarko, but also risks the ire of billionaire investor Carl Icahn, who sources have said has been amassing a stake in Occidental to challenge its Anadarko offer.
Occidental is trying to convince Anadarko to accept its offer and abandon its agreed $33 billion sale to Chevron Corp. Anadarko said on Monday that Occidental’s bid could be potentially superior to the deal with Chevron, but negotiations are continuing.
Earlier on Sunday, France’s Total SA said it has agreed with Occidental to acquire the African assets of Anadarko for $8.8 billion, should the two U.S. oil and gas companies clinch a deal to combine. This removes the risk of Occidental not being able to shed Anadarko assets it considers non-core to the deal.
On Tuesday, Occidental also secured a $10 billion investment from Warren Buffet’s Berkshire Hathaway Inc in support of its bid for Anadarko. The terms of that deal were seen as particularly favourable to Buffett by analysts and investors.
Occidental submitted a new $76 per share offer to Anadarko on Sunday structured as 78 percent cash and 22 percent stock, as opposed to an even cash/stock split in its $76 per share offer previously.
This brought the number of Occidental shares required to fund the bid below the issuance threshold that would have triggered a vote on the deal by Occidental shareholders. Anadarko shareholders would still get to vote on the deal.
The bidding war for Anadarko underscores the value of its assets in the lucrative Permian Basin of West Texas and New Mexico. The vast shale field holds oil and gas deposits that can produce supplies for decades using low-cost drilling techniques.
“The financial support of Berkshire Hathaway as well as the agreement we announced with Total allows us to deliver our balance sheet while focussing our integration efforts on the assets that will provide the most value for us,” Occidental Chief Executive Vicki Hollub said in a statement announcing the amended terms.
However, a request made on Thursday evening by Anadarko’s counsel for three board seats in the merged entity had not been granted, the Occidental statement added.
Should Occidental’s bid be declared superior by Anadarko, Chevron will be given four days to match Occidental’s offer, according to the terms of the contract between Chevron and Anadarko.
Should Anadarko abandon Chevron for Occidental, it will have to pay Chevron a $1 billion deal breakup fee.
The proposed sale of Anadarko’s African assets to Total includes a 26.5 percent interest in a Mozambique liquefied natural gas project, which is moving closer to a final investment decision, and stakes in two offshore fields in Ghana.
Occidental said this does not impact the planned $2 billion of annual cost savings and $1.5 billion of annual capital reductions already outlined as part of its potential acquisition of Anadarko.
Total’s previously outlined plan to increase its dividend by 10 percent and buy back 5 million shares by the end of 2020 will not be impacted by the deal, the French company said in a separate statement.
(Reporting by David French in New York and Philip George in Bengaluru; Additional Reporting by Bate Felix in Paris; Editing by Bill Berkrot and Andrea Ricci)