Occidental Petroleum made a bid for Andarko Petroleum, on Wednesday, for a value of $76 per share. This is higher than another offer, made by Chevron, to scoop up the oil and gas driller. Sent by letter to Andarko’s board, Wednesday, the new Occidental offer is half stock and half cash; specifically $38 per Andarko share in addition to 0.6094 Occidental per Andarko share. This values Andarko at around $57 billion (when you include debt).
Now, Chevron’s announcement for its Andarko buy was only back on April 12 and it was worth approximately $33 billion, also in a combination of cash and stock. This offer had put Andarko’s value at $65 per share. Later, there was a report that another bidder had put up an offer worth more than $70 per share, but this was prior to Chevron making its offer.
According to some sources, the Chevron offer weighs the ratio at 75 percent stock and 25 percent cash. This was roughly $16.25 per Andarko share and 0.3869 Chevron shares per Andarko share. There is also a breakup fee of 3 percent. Occidental CEO Vicki Hollub agrees, noting that Andarko has an excellent collection of assets and that, for whatever reason, makes them the right group to acquire them.
What is most notable about all of this, though, is that once Occidental closed its bid, shares of Andarko soared 11.6 percent, to just over $71. On the other hand, it appears that the market view Occidental Petroleum’s bid as hostile, responding by selling off the stock to drop it 3 percent after the bid.
Hollub, on the other hand, asserts that this offer is friendly, even if Andarko does not view it that way. After all, the offer is 20 percent higher than the level where Andardko was trading on Tuesday. At the same time, Andarko has confirmed receipt of Occidental’s bid—solicited or otherwise—and has responded with careful consideration of the proposal to determine the appropriate course of action.
And all that said, Andarko commented, “The Andarko board has not made any determination as to whether Occidental’s proposal constitutes, or could reasonably be expected to result in, a superior proposal under the terms of the Chevron Merger Agreement.”