Chevron Walks Away From Anadarko Deal With $1 Billion Breakup Fee

Chevron Walks Away From Anadarko Deal With $1 Billion Breakup Fee”

US oil company Chevron Corporation said Thursday that it won't submit a letter increasing its offer to acquire Anadarko Petroleum Corporation, a move it expected to result in Anadarko terminating the merger deal.

Instead Chevron will receive the deal's $1 billion breakup fee, a fee that Oxy will pay if it completes the merger. Chevron said it plans to use those funds for share repurchases.

"Winning in any environment doesn't mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal", Michael Wirth, Chevron's chairman and CEO, said in a written statement when the company made its decision.

In order to finance the offer of US$59 in cash and 0.2934 shares for each ordinary share of the Anadarko Petroleum group, higher than the initial US$38 cash offer and 0.6094 shares for each ordinary share of Anadarko Petroleum, Occidental agreed on the sale of Anadarko's assets in Africa to French group Total.

On Thursday, Chevron said it would collect its $1 billion termination fee and walk away from the negotiations.

With the recent backing of companies such as Warren Buffett's Berkshire Hathaway, Occidental was able to offer a stronger bid to acquire Anadarko.

The most ambitious foray of Chevron Chief Executive Officer Mike Wirth's tenure ended Thursday after the world's third-largest oil explorer by market value elected not to sweeten an offer that fell out of favor with Anadarko directors. "We are the right acquirer ... because we can get the most out of the shale".

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It would make Occidental the third-largest USA oil company with a market value of about $80 billion, dwarfed only by global giants Exxon Mobil and Chevron.

Chevron rose 3.8 percent to US$122 a share at 8:28 NY in pre-market trading.

Although acquiring Anadarko would have elevated Chevron's output into the realm of behemoths Exxon Mobil and Royal Dutch Shell, the combination may have challenged Wirth's commitment to his self-stated primary goals: expanding dividends and limiting debt.

That cleared up uncertainty about Occidental's ability to close the deal.

On May 6, Anadarko dropped its resistance to Hollub's entreaties and blessed her offer as "superior" to Chevron's.

Rating firm Moody's Investors Service said Wednesday it likely would downgrade Occidental if it prevails due to the added debt that will make it harder for the company to confront a downturn in oil prices.

Hollub said it took just an hour and a half to reach an agreement with Berkshire Hathaway Inc's Buffett on the $10 billion investment.

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