In view of the complexity of Section 262 of the DGCL relating to appraisal rights, Anadarko stockholders that consider making a demand for appraisal in accordance with Delaware law should seek the advice of their own legal advisor. To the extent there are any inconsistencies between the foregoing summary and Section 262 of the DGCL, Section 262 of the DGCL will govern.
Failure to comply with all the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, if you wish to exercise your appraisal rights, you are strongly urged to consult a legal advisor before attempting to exercise your appraisal rights.
NYSE Listing of Occidental Common Stock; Delisting and Deregistration of Anadarko Common Stock
Prior to the completion of the merger, Occidental has agreed to use its reasonable best efforts to cause the shares of Occidental common stock to be issued in the merger to be approved for listing on the NYSE subject to official notice of issuance. The listing of the shares of Occidental common stock is also a condition to completion of the merger.
If the merger is completed, Anadarko common stock will cease to be listed on the NYSE and will be deregistered under the Exchange Act, after which Anadarko will no longer be required under SEC rules and regulations to file periodic reports with the SEC with respect to Anadarko common stock.
Material U.S. Federal Income Tax Consequences
General
The following is a general discussion of the material U.S. federal income tax consequences of the merger to holders of Anadarko common stock that exchange their Anadarko common stock for the merger consideration.
This discussion is based upon the Code, U.S. Treasury regulations promulgated under the Code and court and administrative rulings and decisions, all as in effect on the date of this proxy statement/prospectus. These authorities may change, possibly retroactively, or be subject to differing interpretations, and any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion.
This discussion addresses only those holders of Anadarko common stock that hold their Anadarko common stock as a “capital asset” (generally, property held for investment) within the meaning of Section 1221 of the Code. This discussion is not a complete description of all of the U.S. federal income tax consequences of the merger and, in particular, does not address any tax consequences arising under the unearned income Medicare contribution tax enacted pursuant to the Health Care and Education Reconciliation Act of 2010, nor does it address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction, or under any U.S. federal laws other than those pertaining to the income tax. Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to you in light of your individual circumstances or that may be applicable to you if you are subject to special treatment under the U.S. federal income tax laws, including if you are:
| • | a bank or other financial institution; |
| • | a tax-exempt organization; |
| • | a real estate investment trust or real estate mortgage investment conduit; |
| • | an entity or arrangement classified as a partnership for U.S. federal income tax purposes or other pass-through entity such as a subchapter S corporation (or an investor in such an entity or arrangement); |
| • | an insurance company; |
| • | a regulated investment company or a mutual fund; |
| • | a broker-dealer or trader in stocks and securities, or currencies; |
| • | a trader in securities that elects the mark-to-market method of accounting for its securities; |
| • | a person subject to the alternative minimum tax provisions of the Code; |
| • | a person that received Anadarko common stock through the exercise of an employee stock option, through a tax qualified retirement plan or otherwise as compensation; |
| • | a person that has a functional currency other than the U.S. dollar; |
| • | an accrual-method taxpayer that is required to accelerate the recognition of any item of gross income with respect to Anadarko common stock as a result of such income being recognized on an applicable financial statement; |
| • | a person that holds Anadarko common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction; |
| • | a person who owns or has owned (directly, indirectly or constructively) 5% or more of shares of Anadarko common stock or Occidental common stock (by vote or value) or otherwise exercises control over Anadarko’s or Occidental’s corporate affairs; |
| • | a grantor trust; |
| • | a controlled foreign corporation or passive foreign investment company; or |
| • | a U.S. expatriate. |
No ruling has been requested from the Internal Revenue Service (the “IRS”) in connection with the merger or related transactions. Accordingly, the discussion below neither binds the IRS nor precludes it from adopting a contrary position. Furthermore, no opinion of counsel has been or will be rendered with respect to the tax consequences of the merger or related transactions.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of Anadarko common stock that is, for U.S. federal income tax purposes:
| • | an individual citizen or resident of the United States; |
| • | a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| • | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| • | a trust if (i) its administration is subject to the primary supervision of a court within the United States and one or more U.S. persons, within the meaning of Section 7701(a)(30) of the Code, have the authority to control all substantial decisions of the trust or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes. |
A “Non-U.S. holder” is any beneficial owner of Anadarko common stock or, after the completion of the merger, Occidental common stock that, for U.S. federal income tax purposes, is an individual, corporation, estate, or trust that is not a U.S. holder.
If an entity or an arrangement treated as a partnership for U.S. federal income tax purposes holds shares of Anadarko common stock, the U.S. federal income tax consequences to a partner in such partnership (or owner of such entity) generally will depend on the status of the partner and the activities of the partnership (or entity). Any entity treated as a partnership for U.S. federal income tax purposes that holds shares of Anadarko common stock, and any partners in such partnership, should consult their own tax advisors with respect to the tax consequences of the merger in their specific circumstances.
All holders of Anadarko common stock are urged to consult their tax advisors regarding the particular federal, state, local and non-U.S. tax consequences to them of the merger.
The Merger
U.S. Holders
The merger will be a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. holder generally will recognize capital gain or loss equal to the difference, if any, between (i) the sum of any cash, including any cash received in lieu of fractional shares of Occidental common stock, and the fair market value of any Occidental common stock as of the merger received by such U.S. holder in the merger and (ii) the U.S. holder’s adjusted tax basis in its Anadarko common stock.
Capital gains of a non-corporate U.S. holder will generally be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. holder has held its Anadarko common stock for more than one year as of the merger. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Anadarko common stock at different times or different prices, the U.S. holder must determine its tax basis and holding period separately for each block of Anadarko common stock.
A U.S. holder’s aggregate tax basis in Occidental common stock received in the merger will equal the fair market value of such stock as of the merger. A U.S. holder’s holding period in any shares of Occidental common stock received in the merger will begin the day after the merger.
U.S. holders who hold shares of both Anadarko common stock and Occidental common stock at the time of the merger may be subject to different U.S. federal income tax treatment in the merger, as described below under “—Special Consequences of the Merger to Holders of Anadarko Common Stock that Also Own Occidental Common Stock”.
U.S. holders are urged to consult their own tax advisors as to the particular tax consequences of the merger, including the effect of U.S. federal state and local tax laws or foreign tax laws.
Non-U.S. Holders
Subject to the discussion below under the section entitled “—Information Reporting and Backup Withholding”, a Non-U.S. holder generally will not be subject to U.S. federal income or withholding tax on the exchange of Anadarko common stock for Occidental common stock and cash in the merger unless:
| • | any gain recognized on the exchange is effectively connected with the Non-U.S. holder’s conduct of a trade or business in the United States (and, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. holder); or |
| • | the Non-U.S. holder is an individual who is present in the United States for 183 days or more during the taxable year that includes the date of the merger, and certain other conditions are satisfied. |
If the Non-U.S. holder’s gain is described in the first bullet, then the Non-U.S. holder will generally be subject to U.S. federal income tax under the rules described above as if it were a U.S. holder of Anadarko common stock and, in the case of a foreign corporation, may be subject to an additional “branch profits tax” at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).
If the Non-U.S. holder is described in the second bullet, then such Non-U.S. holder will generally be subject to U.S. federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on the gain, which may be offset by certain U.S. source capital losses of the Non-U.S. holder.
Non-U.S. holders are urged to consult their own tax advisors regarding the potential applicability of these rules as well as any income tax treaty that may be applicable in their particular circumstances.
Non-U.S. holders who hold shares of both Anadarko and Occidental at the time of the merger may be subject to different treatment in the merger, as described below under “—Special Consequences of the Merger to Holders of Anadarko Common Stock that Also Own Occidental Common Stock”.
All Non-U.S. holders may be subject to withholding at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on the full amount of the consideration received in the merger, as described below under “—Special Consequences of the Merger to Holders of Anadarko Common Stock that Also Own Occidental Common Stock”.
Non-U.S. holders are urged to consult their own tax advisors as to the particular tax consequences of the merger, including the effect of U.S. federal, state and local tax laws or foreign tax laws.
Special Consequences of the Merger to Holders of Anadarko Common Stock that Also Own Occidental Common Stock
If Section 304 applies to the merger, a holder of Anadarko common stock may be subject to U.S. federal income tax treatment that differs materially from that described above if a holder’s percentage interest in Occidental following the merger is the same as or greater than the holder’s percentage interest in Anadarko before the merger (the “Section 304 Holder Test”). Section 304 will apply to the merger if holders of Anadarko
common stock, taken together, own 50% or more of Occidental shares, by vote or value, following the completion of the merger. Certain constructive attribution rules apply to determine ownership for purposes of the ownership tests described in this paragraph. Because the application of Section 304 to the merger depends on the ownership of Anadarko common stock and Occidental common stock following the merger and is determined after the application of various constructive ownership rules, we are not, and will not, be able to determine whether Section 304 applies to the merger. However, we believe it is possible Section 304 may apply to the merger.
Holders that expect to own (including by attribution) a percentage interest in Occidental after the completion of the merger that is equal to or greater than the holder’s percentage interest in Anadarko immediately before the merger are urged to consult their own tax advisors.
If Section 304 applies to the merger and a holder of Anadarko common stock meets the Section 304 Holder Test, such holder may be treated as receiving a distribution in respect of Occidental common stock. Such distribution would be taxable as a dividend (in an amount equal to the cash consideration and the fair market value of the Occidental common stock received) to the extent of the holder’s allocable share of the earnings and profits of Anadarko and Occidental. To the extent that the amount of cash consideration exceeds Anadarko’s and Occidental’s current and accumulated earnings and profits for the taxable year of the merger, the distribution would first be treated as a tax-free return of capital, to the extent of the holder’s adjusted tax basis in its Anadarko common stock, and to the extent the amount of the distribution exceeds such tax basis, the excess would be taxed as capital gain recognized on a sale or exchange of such holder’s Anadarko common stock. The amount of any such gain would be taxed as described above under “—U.S. Holders” and “—Non-U.S. Holders”, as applicable.
For U.S. holders, dividends are generally taxable as ordinary income. However, non-corporate U.S. holders may be eligible for a reduced rate of taxation on dividends, including dividends arising by operation of Section 304, subject to exceptions for short-term and hedged positions. For corporate U.S. holders, dividends (a) may be eligible for a dividends-received deduction (subject to certain requirements and limitations) and (b) may be subject to the “extraordinary dividend” provisions of the Code.
For Non-U.S. holders, the receipt of any amounts treated as a dividend generally will be subject to U.S. withholding tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty), unless such dividend is effectively connected with a Non-U.S. holder’s conduct of a trade or business within the United States (and, if an applicable income tax treaty so requires, is attributable to a permanent establishment). However, because the application of Section 304 depends on a holder’s particular circumstances, withholding agents may not be able to determine whether any particular holder is treated as receiving a dividend for U.S. federal income tax purposes. Therefore, withholding agents may withhold against all Non-U.S. holders at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on the full amount of the cash consideration and the fair market value of the stock consideration received. If a withholding agent withholds any amount with respect to consideration to be received by a Non-U.S. holder that is exempt from such withholding, the Non-U.S. holder may apply for a refund.
In order to obtain a reduced rate of withholding under an income tax treaty, a Non-U.S. holder claiming such reduced rates will be required to deliver a properly completed IRS Form W-8BEN or W-8BEN-E (or other successor form), as applicable, certifying such Non-U.S. holder’s entitlement to benefits under the income tax treaty to the applicable withholding agent before cash consideration is paid pursuant to the merger. Non-U.S. holders may seek a refund from the IRS of amounts withheld on distributions in excess of their allocable share of Anadarko’s and Occidental’s current and accumulated earnings and profits, to the extent such amounts are not otherwise subject to U.S. federal income tax.
In addition, for Non-U.S. holders, the receipt of any amounts treated as a dividend will generally be subject to Sections 1471 through 1474 of the Code and the U.S. Treasury regulations and administrative guidance issued thereunder (“FATCA”). Non-U.S. holders are urged to consult their own tax advisors regarding the application of FATCA.
The receipt of the consideration in the merger may be subject to backup withholding, as described below in “—Information Reporting and Backup Withholding”.
Section 304 and the regulations and guidance thereunder are complex. Holders that actually or constructively own, or expect to own at the time of the completion of the merger, both Anadarko common stock and Occidental common stock are urged to consult their own tax advisors with respect to the application of Section 304 in their particular circumstances (including as to their tax basis in the shares subject to Section 304) and any actions that may be taken to mitigate any potential adverse tax consequences.
Information Reporting and Backup Withholding
Any shares of Occidental common stock and/or cash received by a U.S. holder or a Non-U.S. holder in the merger may be subject to information reporting and backup withholding. To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should timely complete and return to Occidental or the exchange agent an IRS Form W-9 (or other successor form), certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding. A Non-U.S. holder generally may establish an exemption from backup withholding by certifying its non-U.S. person status under penalties of perjury on a properly completed applicable IRS Form W-8 (or other successor form).
Any amounts withheld under the backup withholding rules are not additional tax and may be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.
The preceding discussion is intended only as a summary of the material United States federal income tax consequences of the merger and does not purport to be a complete analysis or discussion of all potential income tax effects relevant thereto or a discussion of any other type of taxes. All holders of Anadarko common stock are urged to consult their own tax advisors as to the specific tax consequences to them of the merger, including tax return reporting requirements, the applicability and effect of non-U.S., federal, state, local and other applicable tax laws, and the effect of any proposed changes in the tax laws.
Restrictions on Sales of Shares of Occidental Common Stock Received in the Merger
All shares of Occidental common stock received by Anadarko stockholders in the merger will be freely tradable for purposes of the Securities Act and the Exchange Act except for shares of Occidental common stock received by any Anadarko stockholder who becomes an “affiliate” of Occidental after completion of the merger (such as Anadarko directors or executive officers who become directors or executive officers of Occidental after the merger). This proxy statement/prospectus does not cover resales of shares of Occidental common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any resale.
Certain Contracts between Occidental and Anadarko
Occidental and Anadarko are party to a number of commercial arrangements with one another, which are not material, individually or in the aggregate, to either company.
