Chevron said it won’t raise its bid for Anadrako, clearing the way for Occidental to buy the company (JUSTIN SULLIVAN)

New York (AFP) – Chevron said Thursday it will not raise its bid for Anadarko Petroleum, clearing the way for the offer by Occidental Petroleum that is backed by billionaire investor Warren Buffett .

Andarko initially accepted the bid by Chevron, which sought to complement its portfolio in the fast-growing Permian Basin shale region in West Texas. 

But Chevron Chief Executive Michael Wirth said the US oil giant did not want to overpay for Andarko’s assets.

“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,” Wirth said in a statement.

The announcement came three days after Anadarko characterized Occidental’s bid as “superior” to Chevron’s, putting the onus on Chevron to either pony up more money or walk away from the deal. 

The battle for Anadarko — a midsized US oil company based in Houston — officially began on April 12, when Chevron unveiled a transaction valuing Anadarko at $65 a share.

However, on April 24, Occidental announced a competing bid of $76 a share and released a letter from Chief Executive Vicki Hollub to the Anadarko questioning why Anadarko had refused to engage with Occidental over superior bids before announcing the Chevron deal.

Occidental followed up that move by announcing that it received $10 billion in financing from Buffett’s Berkshire Hathaway.

It also said it had reached a preliminary deal to sell Anadarko’s Africa assets to French company Total for $8.8 billion, pending completion of the Occidental-Anadarko transaction.

Under the agreement with Chevron, Anadarko is required to pay Chevron a $1 billion breakup fee. Chevron said it plans to use those funds to lift share repurchases.

Shares of Chevron jumped 2.9 percent in pre-market trading to $121.00, while Occidental dropped 4.9 percent to $57.27. Anadarko shed 2.5 percent to $74.04.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.