The end came hours after Chevron announced that it would not sweeten its offer for Anadarko, which controls rich oil and natural gas fields in the U.S. Southwest. Anadarko Petroleum Corp. said Thursday that Occidental will pay $59 in cash and 0.2934 of a share of Occidental for each share of Anadarko common stock.
The companies said the deal is expected to close in the second half of this year. It would need approval by Anadarko shareholders and U.S. regulators. The companies also said Occidental has lined up financing for the cash part of the transaction. The deal does not need approval by Occidental's stockholders.
Anadarko Chairman and CEO Al Walker said the outcome delivers significant immediate value to his company's shareholders.
Chevron on Thursday declined to improve on its offer for Anadarko, cutting short the potential for a rare bidding war in the oil patch and allowing Occidental Petroleum to take control of the energy company and its rich fields in the Southwest of the United States.
Occidental challenged Chevron's initial bid last month, offering $57 billion in cash and stock, including debt and book value of non-controlling interest. The offer from Chevron, a company five times the size of Occidental, was worth about $50 billion by the same metric.
Occidental's bid gained momentum two weeks ago when Warren Buffett's Berkshire Hathaway said it would put up $10 billion in financing for Occidental.
The decision by Chevron Corp. to retreat comes a day before its deadline to make a revised proposal or a new offer.
"Winning in any environment doesn't mean winning at any cost," Chevron Chairman and CEO Michael Wirth said in a prepared statement. "Cost and capital discipline always matter."
After calling Occidental's the superior bid earlier this week, Anadarko Petroleum Corp. must shell out a $1 billion breakup fee for terminating its deal with Chevron.
The bidding war surprised those who follow the energy sector. No one has seen a similar grab in decades.
Ambitions have grown, however, in the race to seize a piece of the choice oil and gas fields spread across the Permian Basin in Texas and New Mexico.
"It's truly a real estate question," said Mike Sommers, CEO of the American Petroleum Institute, a trade group which represents more than 600 companies in the oil and gas industry. "Who has the real estate, where the resource is, and Anadarko clearly has key resources within the Permian Basin."
With so few major operators in that area of the country, acquisition targets will likely be smaller than the $57 billion Occidental parted with for access to such rich real estate.
"I think we should pay attention to those smaller producers that have significant resources within the Permian basin," Sommers said.
Chevron said that it won't sit on the money it pulled from the table Thursday. The company, based in San Ramon, California, plans to spend 25% more on share repurchases, up to $5 billion a year.
Shares of Chevron rose 2.5%, while Anadarko's stock declined 3%. Shares of Occidental Petroleum fell 6%.