Bidding battle takes an unexpected turn as Occidental offers mostly cash in their offer
The bidding conflict between Occidental and Chevron about who gets to merge with Anadarko has taken yet another surprising turn since Occidental announced its intention of a hostile takeover.
Although, Anadarko has cherished meetings with the representatives of Occidental, has not issued any notice that is to make one believe that they are considering rejecting the already confirmed merger with Chevron.
On Sunday, Occidental had announced that they are revising their offer to one that is willing to pay the shareholders, essentially cash with revised cash to bestow ratio which is increasing on an offer that was already higher to what Chevron was offering.
Occidental has not changed the value of the purchase share, it remains at $76 but they have chosen to pay 78% in cash and 22% in stocks of the company. The transaction worth nearly $57 billion which were originally structured at 50-50 cash to stock ratio has now been changed in an attempt to derail the merger.
The latest offer which Anadarko has accepted offers $65 per share and has a 75% stock and 25% cash deal, which is worth $50 billion including its debt. The deal that has been revised clearly seems attractive to Anadarko as they resumed the discussion with Occidental last week.
Moreover, Occidental feels strong about its revised offers, assuming it is perfectly structured to woo the Anadarko board to scrap the Chevron deal and merge with them instead.
This move by Occidental seems to have multiple reasons behind it, while the primary reason is to try and better the deal offered by Chevron there are other reasons for the drastic revision. Last week, one of the biggest shareholders of Occidentals had expressed their disappointment with the offers made with Anadarko.
Occidental, by offering more cash need not claim the approval of its shareholders to purchase Anadarko. The risk of the shareholders voting the purchase down was also clearly one of the factors that drove this decision.
Further, it can be said that Anadarko would comprehend the profit by trusting this deal. Against the scrapping of their offer, Occidental would have paid Chevron with a $1 billion as a compensation price.
Thus both companies will lose the goodwill of being the second largest oil magnate in America. The ball is now in Anadarko’s court.