Occidental seals $38 billion deal for Anadarko after Chevron walks away

Anadarko Petroleum has entered into a definitive merger agreement with Occidental Petroleum after Chevron announced it would not be submitting an increased offer to buy the oil giant.

On Monday, Anadarko announced that its board had unanimously decided that Occidental’s revised US$38 billion bid was superior to Chevron’s $33 billion offer. Anadarko also said it would break its agreement with Chevron if the company could not come back with a better offer.

Chevron’s subsequent decision to pull out of the deal paved the way for Anadarko to accept Occidental’s offer, but also means that Chevron will walk away with a $1 billion breakup fee.

“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,” said Chevron chairman and CEO Michael Wirth.

The announcement seemingly brings to a close the high-stakes bidding war for Anadarko and its attractive holdings in the Permian Basin of Texas, the centre of the US shale oil boom.

After submitting a higher bid, Occidental secured a $10 billion investment from Berkshire Hathaway and arranged to sell Anadarko’s African operations to French oil major Total for $8.8 billion.