Background – Occidental Enters the Fray Against Chevron in the Fight for Anadarko
April 24th, 2019: 12 days after Chevron (CVX) reached an agreement to buy Anadarko Petroleum (APC) for $48bn, Occidental Petroleum went public with a counteroffer of $57bn. Investors wondered, “is a company five times smaller than Chevron really a contender?”
JetTrack clients monitoring the deal saw from OXY’s corporate jet activity that indeed, the smaller company was not going to let two years of courtship end without a fight. They saw that the Andarkostock bump had staying power.
Key Considerations – Cash, Stock, and Shareholder Approval
Andarko had heard numerous offers from OXY over the previous two years and two key sticking points were:
The closing risk represented by the need for OXY to secure stockholder approval if the stock component was over 20%. Until then OXY had offered half cash, half stock.
Overall concern by Anadarko about the large amount of stock involved and the debt OXY would need to take on to finance the deal
JetTrack– OXY hits the road
JetTrack users saw OXY CEO Vicki Hollubstart a two week road trip that included stops she hadn’t made in years, or sometimes ever.
Her goal? Either convince reluctant shareholders to vote for the deal or find enough cash to push them to the sidelines.
Baltimore - With their third biggest shareholder, T. Rowe, voicing opposition to the deal, OXY’s first flight after the announcement was to Baltimore.
Paris - Home of Total energy. Anadarko’s African assets fit well with Total’s strategy, and their divestiture would be a necessary source of cash. That Sunday it was announced Total would buy them for $8.8bn.
Omaha – Visited for the first time in over 5 years. This was the flight that two days later ended up being reported on Bloomberg.
Investor Roadshow - Then you see in succession flying to their largest shareholders cities for the first time in a year and half.
Once news of Buffett’s $10bn preferred investment came out and news continued to leak that shareholders were against the deal, Anadarko upped their cash portion and shut out the need for shareholder approval.
With only the context of the work they had done, investors used JetTrackto successfully short Oxy, down 11%, and go longer Anadarko, up another 15%.