The bidding war between Occidental Petroleum and Chevron to acquire Anadarko Petroleum is heating up, with Anadarko saying Tuesday that Occidental now has the "superior proposal."
Anadarko has assets in the Permian-rich basin in the US. Both Chevron and Occidental have been locked in a bidding war over the assets, which would boost their presence in the upstream US shale market, for almost a month following Chevron's April 12 announcement it was buying the company in a cash-and-stock deal it valued at $50 billion.
Occidental on Sunday revised its own bid for Anadarko, offering to purchase the company for 78% cash and 22% stock, compared with its earlier 50-50 cash-and-stock proposal it valued at $57 billion. A $10 billion preferred stock investment from Berkshire Hathaway gave Occidental the ability to offer more cash for Anadarko, the company noted.
Late Monday, Anadarko's board of directors unanimously determined Occidental's revised acquisition proposal the "superior proposal," the company said in a statement.
"We acknowledge receipt of Anadarko's notification and we have no further comment at this time," Chevron spokesman Morgan Crinklaw said in an email Tuesday.
Chevron has four days to respond to the revised bid and make another proposal. If Anadarko decides to terminate its Chevron merger and accept the Occidental offer, it must pay Chevron $1 billion in termination fees.
Following Anadarko's acceptance of the revised Oxy offer, S&P Global Ratings announced it was reaffirming its rating on Occidental, which remained on CreditWatch Negative. The negative CreditWatch placement reflects the possibility that the ratings agency could lower or affirm its ratings for the producer following the closure of its acquisition of Anadarko.
"Based on the updated terms of the proposed transaction, we expect a downgrade would not be more than three notches. The updated offer terms include a 78% cash component compared to 50% in the previous offer, which results in weaker credit measures," S&P Global Ratings said in a statement.
S&P Global Ratings affirmed its A issuer credit, A-1 short-term, and A senior unsecured ratings on Occidental.
This week's developments in the continuing merger drama followed an announcement late Sunday by France's Total, saying it had tied up a deal with Occidental to buy Anadarko's Africa assets if Occidental's deal with Anadarko is successful.
Total would pay $8.8 billion for assets in Algeria, Ghana, Mozambique and South Africa. Access to these assets, 70% of which are natural gas, will further expand Total's global LNG position and make it the second-largest LNG seller that is also an international oil company, according to Wood Mackenzie.
