Anadarko sold to Occidental for $38bn

November 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2019 Issue

In a deal that ranks as one of the largest oil mergers and acquisitions (M&A) of the past few years, Occidental Petroleum Corporation has completed the acquisition of Anadarko Petroleum Corporation in a transaction valued at $38bn, including the assumption of Anadarko’s debt.

Expected to drive significant value and returns, Anadarko shareholders are receiving $59.00 in cash and 0.2934 shares of Occidental common stock per share of Anadarko common stock in the transaction.

Occidental expects to fund the cash portion of the consideration through a combination of cash from its balance sheet and fully committed debt and equity financing, including proceeds from a previously announced $10bn equity investment by Berkshire Hathaway, Inc.

Furthermore, Occidental expects to reduce debt over the next 24 months through free cash flow growth, realising identified synergies and executing a planned portfolio optimisation strategy, with $10-15bn of divestitures over the next 12 to 24 months – $8.8bn of which has already been agreed through the transaction with Total, a deal which saw the sale of Anadarko’s Algeria, Ghana, Mozambique and South Africa assets.

“This exciting transaction will create a global energy leader with a world-class portfolio, proven operational capabilities and industry leading free cash flow metrics,” said Vicki Hollub, president and chief executive of Occidental. “This transaction further establishes Occidental as a premier operator in prolific global oil and gas regions with the ability to deliver production growth of 5 percent through investment in projects with industry-leading returns.”

The transaction provides compelling strategic and financial rationale for all stakeholders as it: (i) applies Occidental’s proven operational and technical excellence to Anadarko’s portfolio; (ii) enhances the leadership position of Occidental and bolsters its portfolio with additional free cash flow generating assets; (iii) creates a global energy leader with enhanced scale and expertise to lead energy into a low carbon future; (iv) provides expected accretion year one, generating even stronger financial returns; and (v) presents opportunities for high impact synergies and capital spending efficiency.

“With Anadarko’s world-class asset portfolio now officially part of Occidental, we begin our work to integrate our two companies and unlock the significant value of this combination for shareholders,” continues Ms Hollub. “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. We look forward to updating the market on our continued progress in the months ahead.”

The closing of the transaction follows unanimous approval by the boards of both companies, as well as the approval of 99 percent of Anadarko’s shareholders and regulatory approvals.

An international oil and gas exploration and production company with operations in the US, Middle East and Latin America, Occidental is one of the largest US oil and gas companies, based on equity market capitalisation. Headquartered in Houston, Occidental purchases, markets, gathers, processes, transports and stores hydrocarbons and other commodities.

Acting as Occidental’s financial advisers are Bank of America Merrill Lynch and Citi. Cravath, Swaine & Moore LLP is serving as legal counsel.

Ms Hollub concluded: “With greater scale, an unwavering focus on driving profitable growth, and our commitment to growing our dividend, we are creating a unique platform to drive meaningful shareholder value.”

Fraser Tennant