By Jennifer Hiller
HOUSTON (Reuters) - Occidental Petroleum Corp (NYSE:OXY) said on Monday its latest bid to take over Anadarko Petroleum Corp (NYSE:APC) was designed to make sure Anadarko's board considers its offer superior to one from Chevron Corp (NYSE:CVX), even though it could spark tensions with its own shareholders.
Occidental is prodding Anadarko's board to abandon its $33 billion merger agreement with Chevron. Occidental on Sunday increased the cash component of its $38 billion bid, removing a requirement to win the approval of Occidental shareholders.
"We weren't playing on a level playing field," Occidental Chief Executive Officer Vicki Hollub said on a call with analysts on Monday morning. By raising the cash component, Occidental will not need approval from its shareholders.
The company did not want to bypass a shareholder vote, but felt its only options were to "increase the share price or provide clarity at closing," Hollub said. Chevron's offer did not require shareholder approval, which is why Anadarko has so far preferred that bid, Hollub said.
Anadarko shares jumped 3.1 percent to $74.95 while Occidental dipped 0.4 percent to $57.74 and Chevron rose nearly 1 percent to $118.43.
Several Occidental shareholders oppose the merger, though, including T. Rowe Price Group Inc. The deal also risks the ire of billionaire investor Carl Icahn, who has been amassing a stake in Occidental to challenge its Anadarko offer, according to sources.
The bid "smells like desperation," said Edward Jones analyst Jennifer Rowland. "They clearly aren't willing to take no for an answer, and are willing to leverage what had historically been a pristine balance sheet to get the deal done," Rowland said.
Occidental said it has suspended its share repurchase program due to the Anadarko bid, and will instead focus on paying down debt.
Anadarko said on Sunday its board will review the proposal.
Earlier Sunday, France's Total SA (PA:TOTF) said it had agreed with Occidental to buy the African assets of Anadarko for $8.8 billion if the two U.S. oil and gas companies merge.
Last week Occidental secured a $10 billion investment from Warren Buffett's Berkshire Hathaway Inc . (NYSE:BRKa) Analysts and investors see the terms of that deal as particularly favorable to Buffett.
Occidental's new offer to Anadarko is 78 percent cash and 22 percent stock, compared with an even cash/stock split previously.
The bidding war between Occidental and Chevron underscores the value of Anadarko's assets in the lucrative Permian Basin of West Texas and New Mexico. The vast shale field holds oil and gas deposits that can produce supplies for decades.