Occidental Petroleum’s $55 billion Acquisition of Anadarko Petroleum Corporation

By Isak Muhr, Elsa Henriksson (Stockholm School of Economics), Chris Leung, and Vinay Naik (University of Warwick) – Date: 22/11/2019

 

Overview of the Deal

  • Acquirer: Occidental Petroleum (NYSE: OXY)

  • Target: Anadarko Petroleum Corporation (NYSE: APC)

  • Estimated value: $55 billion

  • Announcement date: 06/05/2019

  • Acquirer Advisors: Citi, Bank of America Merrill Lynch

  • Target Advisors: Jefferies LLC, Goldman Sachs, J.P. Morgan, Evercore Inc.


In April 2019, Anadarko Petroleum Corporation (APC) agreed to sell its business to Chevron for $65 a share. In May, Occidental Petroleum (OXY) presented a revised buyout offer to Anadarko, offering to buy the company for $76 a share. This deal would pay shareholders 78% cash and 22% in stock as they aimed to derail Chevron’s acquisition of Anadarko, which was structured as a 75% stock and 25% cash deal. Chevron did not make a counter bid, despite such expectations. Occidental thereby outbid their competitor to acquire Anadarko in a transaction valued at $55 billion, including the assumption of Anadarko’s debt, making it the largest U.S. oil and gas merger in more than 20 years (since Exxon bought Mobil). Backing by Warren Buffet’s Berkshire Hathaway helped Occidental, a much smaller player than Chevron, close the deal and grab a major oil industry prize: Anadarko’s nearly a quarter million acres in the Permian Basin, where the low-cost outputs has helped turn the United States into the world’s top oil producer. In August, Occidental completed the deal with more than 99% of shareholders voting in favor of the merger.


“We begin our work to integrate our two companies and unlock the significant value of this combination for shareholders. We expect to deliver at least $3.5bn annually in cost and capital spending synergies and the focus of our Board and management team is on execution to achieve the promise of this exciting combination.” 

– Occidental Petroleum President and CEO Vicki Hollub


Company Details (Acquirer – Occidental Petroleum)

Occidental Petroleum is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. Occidental is one of the largest U.S. oil and gas companies based on market capitalization. Occidental’s four main business units are oil & gas, chemicals, marketing & other midstream and WES midstream. The company’s wholly owned subsidiary OxyChem manufactures and markets basic chemicals and vinyls.


- Founded in 1920

- Headquartered in Houston, Texas, United States

- CEO and President: Vicki Hollub

- Number of employees: 11,000


- Market Cap: $34.8bn - EV: $94.6bn

- LTM Revenue: $18.9bn - LTM EBITDA: $8.4bn

- LTM EV/Revenue: 5.0x - LTM EV/EBITDA: 11.3x


Company Details (Target – Anadarko Petroleum Corporation)

Anadarko Petroleum Corporation is among the world’s largest independent oil and natural gas exploration and production companies, engaged in gathering, processing, treating, and transportation of petroleum and natural gas. Their portfolio of assets encompasses premier positions in the DJ basins onshore U.S., oil-focused opportunities in the Gulf of Mexico and deepwater basins worldwide. 


- Founded in 1959