In addition to the other information included in and incorporated by reference into this proxy statement/prospectus, including the matters addressed in “Cautionary Note Regarding Forward-Looking Statements” beginning on page , Anadarko stockholders should carefully consider the following risk factors before deciding whether to vote for the proposal to adopt the merger agreement. In addition, you should read and consider the risks associated with each of the businesses of Anadarko and Occidental because these risks will relate to the combined company following the completion of the merger. Descriptions of some of these risks can be found in the respective Annual Reports of Occidental and Anadarko on Form 10-K for the fiscal year ended December 31, 2018, as such risks may be updated or supplemented in each company’s subsequently filed Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, which are incorporated by reference into this proxy statement/prospectus. You should also consider the other information in this document and the other documents incorporated by reference into this document. See “Where You Can Find More Information” beginning on page .
The merger is subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the merger in a timely manner or at all could have material adverse effects on Occidental and Anadarko.
The completion of the merger is subject to a number of conditions, including, among others, (i) the adoption by Anadarko stockholders of the merger agreement, (ii) the termination or expiration of the waiting period under the HSR Act and (iii) the absence of an injunction prohibiting completion of the merger, which make the completion and timing of the completion of the merger uncertain. For a more detailed discussion regarding conditions to the merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page . Also, either Occidental or Anadarko may terminate the merger agreement if the merger has not been consummated by February 9, 2020 (or, if the reason for not closing by February 9, 2020 is that the regulatory conditions specified in the merger agreement have not been satisfied by that date or because of an injunction prohibiting completion of the merger, and all other closing conditions of the parties have been satisfied, duly waived or are then capable of being satisfied, May 9, 2020), except that this right to terminate the merger agreement due to the occurrence of the end date will not be available to any party whose failure to perform any obligation under the merger agreement has principally caused or resulted in the failure of the merger to be consummated on or before that date.
If the merger is not completed, Occidental’s and Anadarko’s respective ongoing businesses, financial condition, financial results and stock prices may be materially adversely affected and, without realizing any of the benefits of having completed the merger, Occidental and Anadarko will be subject to a number of risks, including the following:
| • | the market price of Occidental common stock or Anadarko common stock could decline to the extent that the current market price reflects a market assumption that the transaction will be completed; |
| • | each party could owe substantial termination fees to the other party under certain circumstances (see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 120); |
| • | if the merger agreement is terminated and the Occidental Board or the Anadarko Board seeks another business combination, Occidental stockholders and Anadarko stockholders cannot be certain that Occidental or Anadarko will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that the other party has agreed to in the merger agreement; |
| • | time and resources committed by Occidental’s and Anadarko’s respective management to matters relating to the merger could otherwise have been devoted to pursuing other beneficial opportunities for their respective companies; |
| • | Occidental or Anadarko may experience negative reactions from the financial markets or from their respective customers, suppliers or employees; and |
| • | Occidental and Anadarko will be required to pay their respective costs relating to the merger, such as legal, accounting, financial advisory and printing fees, whether or not the merger is completed. |
In addition, if the merger is not completed, Occidental or Anadarko could be subject to litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Occidental or Anadarko to perform their respective obligations under the merger agreement. The materialization of any of these risks could adversely impact Occidental and Anadarko’s respective ongoing businesses, financial condition, financial results and stock price.
Similarly, delays in the completion of the merger could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with uncertainty about completion of the merger.
The merger is subject to the requirements of the HSR Act, and regulatory authorities may impose conditions that could have an adverse effect on Anadarko, Occidental or the combined company or that could delay, prevent or increase the costs associated with completion of the merger.
Before the merger may be completed, any waiting period (or extension thereof) applicable to the merger under the HSR Act must have expired or been terminated. On May 23, 2019, Occidental and Anadarko each filed their respective requisite notification and report form under the HSR Act with the DOJ and the FTC. The FTC granted early termination of the applicable waiting period under the HSR Act on June 3, 2019. Occidental and Anadarko are not currently aware of any material governmental consents, approvals or filings that are required prior to the parties’ completion of the transaction other than those under the HSR Act. If additional approvals, consents, clearances or filings are required to complete the transaction, Occidental and Anadarko intend to seek such consents and approvals and make such filings. Regulators may impose conditions, terms, obligations or restrictions in connection with granting approvals or consents for the merger, and such conditions, terms, obligations or restrictions may delay completion of the merger or impose additional material costs on or materially limit the revenues of the combined company following the completion of the merger. There can be no assurance that regulators will choose not to impose such conditions, terms, obligations or restrictions, and, if imposed, such conditions, terms, obligations or restrictions may delay or lead to the abandonment of the merger.
Under the merger agreement, Occidental and Anadarko have agreed to use their respective best efforts to obtain as soon as practicable all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any third party or governmental body, agency, authority or official which are necessary, proper or advisable to consummate the merger, except that Occidental may not be required to undertake, or to request or authorize Anadarko to undertake, any efforts or to take any action if such efforts or action would, or would reasonably be expected to, result in changes or effects which would, individually or in the aggregate, result in, or be reasonably likely to result in, a substantial detriment. As used in this proxy statement/prospectus “substantial detriment” means changes or effects which would, individually or in the aggregate (and after giving effect to any reasonably expected proceeds of any divestiture or sale of assets), result in, or be reasonably likely to result in, a material adverse effect on Anadarko and its subsidiaries, taken as a whole, at or after the effective time of the merger. Any requirement to divest, hold separate or limit the operation of any division, subsidiary, interest, business, product line, asset or property relating to the operations conducted by Occidental and its subsidiaries prior to the effective time of the merger will be deemed to result in a substantial detriment if such action with respect to a comparable amount of assets or businesses of Anadarko and its subsidiaries, taken together with all other such actions taken, would be reasonably likely, in the aggregate, to have a material adverse effect on Anadarko and its subsidiaries, taken as a whole, at or after the effective time of the merger.
For a more detailed description of the regulatory review process under the HSR Act, see “The Merger—Regulatory Approvals Required for the Merger” beginning on page .
The exchange ratio is fixed (except for adjustments in limited circumstances pursuant to the merger agreement) and will not be adjusted in the event of any change in either Occidental’s or Anadarko’s stock price. As a result, the stock portion of the merger consideration payable to Anadarko’s stockholders may be subject to change if Occidental’s stock price fluctuates.
Upon completion of the merger, each share of Anadarko common stock will be converted into the right to receive $59.00 in cash and 0.2934 of a validly issued, fully paid and non-assessable share of Occidental common stock, subject to adjustment only in the event that the merger would otherwise result in the issuance of shares of Occidental common stock (including shares that would be deliverable pursuant to converted stock-based awards pursuant to the merger agreement) in excess of 19.99% of the outstanding shares of Occidental common stock immediately prior to the closing of the merger. See “The Merger Agreement—Merger Consideration” beginning
on page . The exchange ratio will not be adjusted for changes in the market price of either Occidental common stock or Anadarko common stock between the date the merger agreement was signed and completion of the merger. Due to the fixed exchange ratio, fluctuations in the price of Occidental common stock will drive corresponding changes in the value of the stock portion of the merger consideration payable to each Anadarko stockholder. As a result, changes in the price of Occidental common stock prior to the completion of the merger will affect the value of Occidental common stock that Anadarko common stockholders will receive pursuant to the merger.
The price of Occidental common stock has fluctuated during the period between the date the merger agreement was executed and the date of this proxy statement/prospectus, and may continue to change through the date of the special meeting and the date the merger is completed. For example, based on the range of closing prices of Occidental common stock during the period from April 11, 2019, the last trading day before Anadarko announced it had entered into a merger agreement with Chevron Corporation, which merger agreement was subsequently terminated by Anadarko, through July 8, 2019, the latest practicable trading date before the date of this proxy statement/prospectus, the exchange ratio represented a value of the stock portion of the merger consideration ranging from a high of $19.71 to a low of $13.92 for each share of Anadarko common stock. The actual market value of the Occidental common stock received by holders of Anadarko common stock upon completion of the merger may be outside this range.
These variations could result from changes in the business, operations or prospects of Occidental or Anadarko prior to or following the completion of the merger, regulatory considerations, general market and economic conditions and other factors both within and beyond the control of Occidental or Anadarko. At the time of the special meeting, Anadarko stockholders will not know with certainty the value of the shares of Occidental common stock that they will receive upon completion of the merger.
The merger agreement contains provisions that limit Anadarko’s ability to pursue alternatives to the merger, could discourage a potential competing acquiror of Anadarko from making a favorable alternative transaction proposal and, in specified circumstances, could require Anadarko to pay a substantial termination fee to Occidental.
The merger agreement contains certain provisions that restrict Anadarko’s ability to initiate, solicit, knowingly encourage or facilitate or, subject to certain exceptions, engage in discussions or negotiations with respect to, or approve or recommend, any third-party proposal for an alternative transaction. Further, even if the Anadarko Board withdraws or qualifies its recommendation with respect to the adoption of the merger agreement, unless the merger agreement has been terminated in accordance with its terms, Anadarko will still be required to submit each of its merger-related proposals to a vote at the special meeting. In addition, Occidental generally has an opportunity to offer to modify the terms of the transactions contemplated by the merger agreement in response to any third-party alternative transaction proposal before the Anadarko Board may withdraw or qualify its recommendation with respect to the merger-related proposals or otherwise terminate the merger agreement.
In some circumstances, upon termination of the merger agreement, Anadarko will be required to pay a termination fee of $1 billion to Occidental. See “The Merger Agreement—Covenants and Agreements—No Solicitation” beginning on page and “The Merger Agreement—Termination of the Merger Agreement” beginning on page .
These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of Anadarko or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the per share cash or market value proposed to be received or realized in the merger. In particular, the termination fee payable by Anadarko, if applicable, is substantial, and could result in a potential third-party acquiror or merger partner proposing to pay a lower price to the Anadarko stockholders than it might otherwise have proposed to pay absent such a fee.
If the merger agreement is terminated and Anadarko determines to seek another business combination, Anadarko may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the merger.
Members of the Anadarko Board and management have interests in the merger that are different from, or in addition to, those of other stockholders.
In considering whether to adopt the merger agreement and approve the transactions contemplated thereby, Anadarko stockholders should recognize that members of management and the Anadarko Board have interests in the merger that differ from, or are in addition to, their interests as stockholders of Anadarko.
The executive officers and directors of Anadarko have arrangements with Anadarko that provide for severance, accelerated vesting of certain rights and other benefits upon completion of the merger and/or if their employment or service is terminated under certain circumstances following the completion of the merger. Executive officers and directors of Anadarko also have rights to indemnification, advancement of expenses and directors’ and officers’ liability insurance that will survive the completion of the merger. The Anadarko Board was aware of these interests and considered them, among other matters, in approving the merger agreement and making its recommendation that the Anadarko stockholders vote “FOR” the merger proposal and “FOR” the merger-related compensation proposal.
These interests are further described in “The Merger—Interests of Directors and Executive Officers of Anadarko in the Merger” beginning on page .
Each party is subject to business uncertainties and contractual restrictions while the proposed merger is pending, which could adversely affect each party’s business and operations.
In connection with the pendency of the merger, it is possible that some customers, suppliers and other persons with whom Occidental or Anadarko has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with Occidental or Anadarko, as the case may be, as a result of the merger, which could negatively affect Occidental’s or Anadarko’s respective revenues, earnings and cash flows, as well as the market price of Occidental common stock or Anadarko common stock, regardless of whether the merger is completed.
Under the terms of the merger agreement, each of Occidental or Anadarko is subject to certain restrictions on the conduct of its business prior to completing the merger, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into or amend contracts, acquire or dispose of assets, incur indebtedness or incur capital expenditures. Such limitations could adversely affect each party’s businesses and operations prior to the completion of the merger. See “The Merger Agreement—Covenants and Agreements—Conduct of Business” beginning on page .
Each of the risks described above may be exacerbated by delays or other adverse developments with respect to the completion of the merger.
Uncertainties associated with the merger may cause a loss of management personnel and other key employees, which could adversely affect the future business and operations of the combined company.
Occidental and Anadarko are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. The combined company’s success after the completion of the merger will depend in part upon the ability of the combined company to retain key management personnel and other key employees of Occidental and Anadarko. Prior to completion of the merger, current and prospective employees of Occidental and Anadarko may experience uncertainty about their roles within the combined company following the completion of the merger, which may have an adverse effect on the ability of each of Occidental and Anadarko to attract or retain key management and other key personnel. In addition, no assurance can be given that the combined company will be able to attract or retain key management personnel and other key employees of Occidental and Anadarko to the same extent that Occidental and Anadarko have previously been able to attract or retain their own employees.
Potential litigation against Occidental and Anadarko could result in an injunction preventing the completion of the merger or a judgment resulting in the payment of damages.
On May 30, 2019, Anadarko received a demand letter from counsel to a purported Anadarko stockholder, seeking inspection of Anadarko’s books and records pursuant to Section 220 of the DGCL. On May 9, 2019, Anadarko received a demand letter from counsel to a different purported Anadarko stockholder, seeking inspection of Anadarko’s books and records pursuant to Section 220 of the DGCL. On May 30, 2019, a
complaint was filed in the Court of Chancery of the State of Delaware by purported Occidental stockholders High River Limited Partnership, Icahn Partners Master Fund LP and Icahn Partners LP, seeking inspection of Occidental’s books and records pursuant to Section 220 of the DGCL. On June 14, 2019, Occidental filed an answer to the complaint in the Court of Chancery of the State of Delaware.
In addition, other stockholders of Occidental or Anadarko may file lawsuits against Occidental, Anadarko and/or the directors and officers of either company in connection with the merger. These lawsuits, including the matters described above, could prevent or delay the completion of the merger and result in significant costs to Anadarko and/or Occidental, including any costs associated with the indemnification of directors and officers. The defense or settlement of any lawsuit or claim, including the matters described above, that remains unresolved at the time the merger is completed may adversely affect Occidental’s business, financial condition, results of operations and cash flows.
Completion of the merger may trigger change in control or other provisions in certain agreements to which Anadarko is a party, which may have an adverse impact on the combined company’s business and results of operations.
The completion of the merger may trigger change in control and other provisions in certain agreements to which Anadarko is a party. If Occidental and Anadarko are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Occidental and Anadarko are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Anadarko or the combined company. Any of the foregoing or similar developments may have an adverse impact on the combined company’s business and results of operations.
The shares of Occidental common stock to be received by Anadarko stockholders upon completion of the merger will have different rights from shares of Anadarko common stock.
Upon completion of the merger, Anadarko stockholders will no longer be stockholders of Anadarko but will instead become stockholders of Occidental, and their rights as Occidental stockholders will be governed by the terms of Occidental’s restated certificate of incorporation and amended and restated by-laws, as amended. The terms of Occidental’s restated certificate of incorporation and amended and restated by-laws, as amended, are in some respects materially different than the terms of Anadarko’s restated certificate of incorporation and by-laws, which currently govern the rights of Anadarko stockholders. See “Comparison of Rights of Stockholders of Occidental and Anadarko” beginning on page for a discussion of the different rights associated with shares of Anadarko common stock and shares of Occidental common stock.
The unaudited pro forma condensed combined financial data included in this proxy statement/prospectus are presented for illustrative purposes only and the actual financial condition and results of operations of Occidental following the completion of the merger may differ materially.
The unaudited pro forma condensed combined financial data contained in this proxy statement/prospectus are presented for illustrative purposes only, are based on various adjustments, assumptions and preliminary estimates and may not be an indication of Occidental’s financial condition or results of operations following the merger and the other transactions for several reasons. The actual financial condition and results of operations of Occidental following the completion of the merger may not be consistent with, or evident from, these unaudited pro forma condensed combined financial data. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect Occidental’s financial condition or results of operations following the transactions. Any potential decline in Occidental’s financial condition or results of operations may cause significant variations in the stock price of Occidental. For more information, see “Unaudited Pro Forma Condensed Combined Financial Data” beginning on page .
Occidental’s and Anadarko’s respective by-laws have been amended to designate the Court of Chancery of the State of Delaware (or in some cases, other state or federal courts in Delaware) as the sole and exclusive forum for certain disputes between each of Occidental and Anadarko and their respective stockholders, which could limit the ability of Occidental stockholders or Anadarko stockholders to choose the judicial forum for certain proceedings relating to Occidental or Anadarko, as applicable.
Occidental’s and Anadarko’s respective by-laws provide that, unless Occidental or Anadarko, as applicable, consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or,
if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will, to the fullest extent permitted by law, be the sole and exclusive forum for:
| • | any derivative action brought on behalf of Occidental or Anadarko, as applicable; |
| • | any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or stockholder of Occidental or Anadarko as applicable, to Occidental or Anadarko, as applicable, or their respective stockholders; |
| • | any action asserting a claim arising pursuant to, or seeking to enforce any right, obligation or remedy under, the DGCL; |
| • | any action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and |
| • | any action asserting a claim governed by the internal affairs doctrine. |
This forum selection by-law may limit the ability of Occidental stockholders or Anadarko stockholders to bring a claim in a judicial forum that it finds favorable or cost-efficient for disputes with Occidental or Anadarko, as applicable, or any of their respective directors, officers or other employees, which may discourage lawsuits with respect to such claims.
Risks Relating to the Combined Company After Completion of the Merger
Occidental may not achieve the intended benefits and the merger may disrupt its current plans or operations.
There can be no assurance that Occidental will be able to successfully integrate Anadarko’s assets or otherwise realize the expected benefits of the potential transaction (including anticipated annual operating cost and capital synergies). Difficulties in integrating Anadarko into Occidental may result in the combined company performing differently than expected, in operational challenges or in the failure to realize anticipated synergies and efficiencies in the expected timeframe or at all. The integration of the two companies may result in material challenges, including the diversion of management’s attention from ongoing business concerns; retaining key management and other employees; retaining existing business and operational relationships, including customers, suppliers and employees and other counterparties, and attracting new business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process and associated expenses; consolidating corporate and administrative infrastructures and eliminating duplicative operations; coordinating geographically separate organizations; unanticipated issues in integrating information technology, communications and other systems; as well as unforeseen expenses or delays associated with the acquisition.
Occidental will incur a substantial amount of indebtedness and other payment obligations in connection with the financing for the merger.
Occidental expects to fund the cash portion of the consideration by incurring up to $21.8 billion of third-party indebtedness and issuing the series A preferred stock and a warrant to acquire common stock pursuant to the Berkshire Hathaway investment. In addition, Occidental expects to assume approximately $11.9 billion aggregate principal amount of Anadarko’s outstanding long-term debt, excluding finance lease liabilities, as well as approximately $7.3 billion aggregate principal amount of Western Midstream Operating, LP’s outstanding short- and long-term debt, in the merger. Occidental cannot guarantee that it will be able to generate sufficient cash flow to service and repay this indebtedness or to pay the dividends required to be paid on the series A preferred stock, or that it will be able to refinance such indebtedness on favorable terms, or at all. The failure to so repay or refinance such indebtedness, or to pay dividends on such series A preferred stock, could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or share price. If Occidental is unable to service such indebtedness and fund its operations, Occidental may be forced to reduce or delay capital expenditures, seek additional capital, sell assets or refinance Occidental’s indebtedness. Any such action may not be successful and Occidental may be unable to service such indebtedness and its operations, which could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or share price. For more information about the financing of the merger, see “The Merger—Financing of the Merger and Treatment of Existing Debt” beginning on page .
Occidental’s significant additional indebtedness following the merger could adversely affect Occidental’s financial position and prevent Occidental from fulfilling its obligations with respect to such indebtedness. Any refinancing of this debt could be at significantly higher interest rates. Occidental’s substantial indebtedness could lead to adverse consequences. Any resulting downgrades in Occidental’s credit ratings could increase the cost of further borrowings or refinancings of Occidental’s indebtedness, limit access to sources of financing in the future or lead to other adverse consequences.
Occidental’s increased indebtedness following the completion of the merger could have adverse consequences, including but not limited to:
| • | increasing its vulnerability to general adverse economic and industry conditions; |
| • | requiring it to dedicate a substantial portion of its cash flow from operations to make debt service payments, thereby reducing the availability of cash flow to fund working capital, capital expenditures, acquisitions and investments and other general corporate purposes; |
| • | limiting its flexibility in planning for, or reacting to, challenges and opportunities, and changes in its businesses and the markets in which it operates; |
| • | limiting its ability to obtain additional financing to fund working capital, capital expenditures, acquisitions and debt service requirements and other financing needs; |
| • | increasing its vulnerability to increases in interest rates in general because a substantial portion of its indebtedness bears, and in the future may bear, interest at floating rates; and |
| • | placing it at a competitive disadvantage to competitors that have less debt. |
In addition, although Occidental is expected to maintain an investment grade credit rating, Occidental’s increased indebtedness following the completion of the merger could result in a downgrade in the credit rating of Occidental or any indebtedness of Occidental or its subsidiaries. A downgrade in the credit rating of Occidental or any indebtedness of Occidental or its subsidiaries could increase the cost of further borrowings or refinancings of such indebtedness, limit access to sources of financing in the future or lead to other adverse consequences.
The terms of Occidental’s indebtedness currently impose, and any additional indebtedness it incurs in the future may impose, significant operating and financial restrictions on it. These restrictions limit Occidental’s ability to, among other things, incur additional indebtedness, make investments, pay certain dividends, prepay other indebtedness, sell assets, incur certain liens and enter into agreements with its affiliates, and also restrict Occidental’s subsidiaries’ ability to pay dividends, merge or consolidate. In addition, certain of Occidental’s credit facilities and other financing arrangements require, and following the merger certain agreements governing Anadarko’s and its subsidiaries’ indebtedness will require, Occidental (or certain of its subsidiaries) to maintain specified financial ratios. A breach of any of these covenants or Occidental’s (or such subsidiaries’) inability to maintain the required financial ratios could result in a default under the related indebtedness. If a default occurs, the relevant lenders could elect to declare such indebtedness, together with accrued interest and other fees, to be immediately due and payable. These factors could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or stock price.
Occidental may not be able to obtain its preferred form of debt financing in connection with the merger on anticipated terms or at all.
Occidental expects to fund a portion of the cash consideration and the payment of fees and expenses related to the merger using the proceeds of long-term financing, which Occidental currently expects to include borrowings under a new term loan facility and the issuance of debt securities through a public offering or in a private placement, in addition to proceeds from the Berkshire Hathaway investment. However, there is a risk that market conditions will not be conducive to Occidental executing this financing plan with respect to the long-term financing, or that the long-term financing will not be available on favorable terms. As a result, Occidental may need to pursue other options, including borrowings under a bridge loan credit facility, which may result in less favorable financing terms that could increase costs and/or adversely impact the operations of Occidental. For additional information, see “The Merger—Financing of the Merger and Treatment of Existing Debt” beginning on page .
Occidental may not be able to consummate the sale to Total of the assets, liabilities, businesses and operations of Anadarko in Algeria, Ghana, Mozambique and South Africa or complete its planned divestitures of certain assets on favorable terms or at all.
The Total transaction is conditioned on the completion of the merger, the execution and delivery of a definitive purchase agreement, and the receipt of required regulatory approvals, as well as other customary closing conditions. Occidental may not be able to consummate the Total transaction on the terms described herein or at all, or obtain the proceeds that could be realized from it, and those cash proceeds may not be adequate to meet any debt service obligations then due. In addition, although Occidental intends to complete $10–15 billion of divestitures of certain assets within 24 months after completion of the merger (including the Total transaction), Occidental may not be able to complete its planned divestitures on favorable terms or at all. Any difficulties with respect to the completion of the Total transaction or other planned divestitures could have a material adverse effect on Occidental’s business, financial condition, results of operations, cash flows and/or stock price.
For more information regarding the Total transaction, see “The Merger—Sale of Anadarko Assets to TOTAL S.A.” beginning on page .
Anadarko stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over the policies of the combined company than they now have on the policies of Anadarko.
Occidental stockholders currently have the right to vote in the election of the Occidental Board and on other matters affecting Occidental. Anadarko stockholders currently have the right to vote in the election of the Anadarko Board and on other matters affecting Anadarko. Immediately after the merger is completed, it is expected that current Occidental stockholders will own approximately 84% of the combined company’s common stock outstanding and current Anadarko stockholders will own approximately 16% of the combined company’s common stock outstanding, respectively (without giving effect to the exercise of the warrant to be issued pursuant to the Berkshire Hathaway investment).
As a result, current Anadarko stockholders will have less influence on the policies of Occidental than they now have on the policies of Anadarko.
The market price of the combined company’s common stock may be affected by factors different from those affecting the price of Occidental or Anadarko common stock.
Upon completion of the merger, holders of Occidental common stock and Anadarko common stock will be holders of common stock of Occidental. As the businesses of Occidental and Anadarko are different, the results of operations as well as the price of the combined company’s common stock may in the future be affected by factors different from those factors affecting Occidental and Anadarko as independent stand-alone companies. The combined company will face additional risks and uncertainties that Occidental or Anadarko may currently not be exposed to as independent companies.
The market price of Occidental’s common stock may decline as a result of the merger.
The market price of Occidental common stock may decline as a result of the merger if, among other things, the combined company is unable to achieve the expected benefits of the potential transaction (including anticipated annual operating cost and capital synergies) in connection with the integration of Occidental’s and Anadarko’s businesses, or if the transaction costs related to the merger are greater than expected. The market price also may decline if the combined company does not achieve the perceived benefits of the transaction as rapidly or to the extent anticipated by financial or industry analysts or if the effect of the merger on the combined company’s financial position, results of operations or cash flows is not consistent with the expectations of financial or industry analysts.
The issuance of shares of Occidental common stock in the merger or upon the exercise of the warrant to be issued pursuant to the Berkshire Hathaway investment could on its own have the effect of depressing the market price for Occidental common stock. In addition, many Anadarko stockholders may decide not to hold the shares of Occidental common stock they receive as a result of the merger. Other Anadarko stockholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of Occidental common stock they receive as a result of the merger. Such sales of Occidental common stock may take place shortly following the completion of the merger and could have the effect of depressing the market price for Occidental common stock.
Additionally, under the terms of the series A preferred stock to be issued pursuant to the Berkshire Hathaway investment, Occidental may elect to pay dividends on the preferred stock in the form of Occidental common stock. If Occidental chooses to do so, it may have an adverse effect on the market price of Occidental common stock.
The merger may not be accretive, and may be dilutive, to Occidental’s cash flow per share and free cash flow per share, which may negatively affect the market price of Occidental common stock.
Occidental currently expects the merger to be accretive to its cash flow per share (calculated as cash flow from operations before working capital, less distributions attributable to noncontrolling interest, divided by total common diluted shares outstanding) and free cash flow per share (calculated as cash flow from operations before working capital, less distributions attributable to non-controlling interest, capex, preferred dividends and common dividends, divided by total common diluted shares outstanding), within twelve months after the completion of the merger. This expectation, however, is based on preliminary estimates that may materially change. In addition, Occidental could fail to realize all the benefits anticipated in the transaction or experience delays or inefficiencies in realizing such benefits. Such factors could, when combined with the issuance of shares of Occidental common stock in the merger, result in the transaction being dilutive to Occidental’s cash flow per share and/or free cash flow per share, which could negatively affect the market price of shares of Occidental common stock.
Occidental cannot assure you that it will be able to continue paying dividends at the current rate.
Occidental plans to continue its current dividend practices following the merger. However, based on the number of issued and outstanding shares of Anadarko common stock as of July 8, 2019, the most recent practicable date for which such information was available, Occidental will issue approximately 146,470,009 shares of Occidental common stock in connection with the merger. The number of shares of Anadarko common stock issued and outstanding as of the record date is not expected to be meaningfully different from the number as of July 8, 2019. Continuing Occidental’s current dividend practices following the merger will require additional cash to pay such dividends, which it may not have. In addition, the series A preferred stock to be issued pursuant to the Berkshire Hathaway investment will require Occidental to pay substantial dividends following the closing of the merger. So long as any share of the series A preferred stock remains outstanding, Occidental may not declare or pay dividends on Occidental common stock unless all accrued and unpaid dividends on all outstanding shares of series A preferred stock have been, or are contemporaneously, declared and paid in full and Occidental has paid, or will contemporaneously pay, in full any portion of the redemption price required to be paid in respect of the series A preferred stock. See “The Merger—Financing of the Merger and Treatment of Existing Debt—Berkshire Hathaway Investment” beginning on page . For these and other reasons generally affecting the ability to pay dividends, stockholders of the combined company may not receive the same dividends following the merger. Stockholders also should be aware that they have no contractual or other legal right to dividends that have not been declared.
Other Risk Factors of Occidental and Anadarko
Occidental’s and Anadarko’s businesses are and will be subject to the risks described above. In addition, Occidental and Anadarko are and will continue to be subject to the risks described in Occidental’s and Anadarko’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2018, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For the location of information incorporated by reference into this proxy statement/prospectus, see “Where You Can Find More Information” beginning on page .
