Occidental's Anadarko bid is 'very bad idea'

Occidental Petroleum Corp.’s rival takeover offer for Anadarko Petroleum Corp. drew critical initial reviews from some analysts, including Mizuho Securities USA LLC’s Paul Sankey, who said major investors have told him they won’t support the bid.

Occidental went public Wednesday with its $76 per share cash-and-stock offer, a premium of about 20 percent over Chevron’s April 12 agreement to buy The Woodlands, Texas-based Anadarko. Occidental said it had been rebuffed several times previously.

Occidental is “really ripping up the playbook here… we suspect with a great degree of hubris and management ego,” Sankey wrote in a note to clients. “We think the bid is a very bad idea. So does pretty much absolutely everyone we talk to, that includes front page Oxy shareholders who are very unhappy, to say the least.”

Sankey said Occidental’s argument for cost savings in buying Anadarko “is applicable, perhaps with more credibility, to Chevron,” and that while Occidental has offered a higher per-share offer, its own stock has dropped on news of the offer, erasing shareholder value.

Occidental shares dropped as much as 4.2 percent in New York Wednesday, though they recovered from the lows seen in pre-market trading immediately after it announced its offer. An Occidental representative declined to comment.

Tudor Pickering Holt & Co. analysts said in a note there are other deals on the market that would make better sense for Occidental, offering acreage that fits better with the company’s current footprint in the Permian Basin. While Anadarko has a Permian presence, it also has has operations in Colorado and a major liquefied natural gas project in Mozambique.

“There is no asset overlap outside of the Permian Basin between the two companies,” Keybanc Capital Markets Inc. analyst Leo Mariani said in a note. Chevron “is a much larger company and a potential bidding war for the company is not in the best interest of” Occidental shareholders.

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