Standing on the verge of victory in the takeover deal of Anadarko Petroleum, Vicki Hollub, CEO, Occidental Petroleum, presents her case before the company’s shareholders on Friday. Hollub’s swift deal-making move in the case, without the need for a deal vote by the stakeholders, greatly helped strengthened her chances of a possible win.
Hollub won the deal from the rival challenger, Chevron Corp, by putting forward a long-shot bid, which has been termed risky by some of the former’s own shareholders. The bid might bring Occidental under a fresh debt of nearly $46 billion. By swiftly drawing up cash and tactfully siding allies on her side, Hollub managed to make Chevron withdraw from the deal, emerging as the winner.
In spite of having no say on the deal, Occidental shareholders are viewing the annual meeting as their first chance to put forward their views on the matter before the company management. The lack of a deal vote clubbed with the company’s share value dropping to $56.33 on Thursday, the lowest ever in 10 years, is believed to lead Hollub to a messy victory in the takeover deal.
Meanwhile, Occidental’s move to take over Anadarko by increasing the cash portion of the $76-per-share offer without the need to obtain a shareholder vote has drawn criticism from its investors. However, the $38 billion mostly-cash deal is likely to place Occidental as the single-largest oil producer in the Permian Basin, the top shale field in the US, until the emergence of another appropriate suitor.
Anadarko possesses almost a quarter million acres in the Permian Basin, and following its takeover, Occidental would gain access to 1.64 million acres of land in the area, along with control over the growing shale fields in Colorado and Wyoming. Moreover, Occidental’s global oil production could double to 1.4 million barrels of oil and gas per day.
However, the financial and operating risks associated with the deal have worried some of the big company investors, such as T. Rowe Price and Matrix Asset Management. “If you do this, you have a strained balance sheet, period”, said Christian Ledoux, investment chief, South Texas Money Management, one of the many Occidental’s shareholder firms.
