In May of 2019, Vicki Hollub, the CEO of Occidental Petroleum (Oxy), pulled off a blockbuster. Bidding against Chevron, one of the world's largest oil firms, she had managed to buy Anadarko, another oil company that was roughly the size of Oxy. Hollub believed that the combination of the two firms brought the possibility for billions of dollars in synergies, more than offsetting the cost of the acquisition. The deal would make Oxy the largest producer in what had become the world's richest oil field, the Permian Basin. Hollub called the deal "transformative" and a "once in a generation opportunity."
The stock market appeared to disagree with Hollub's assessment, as Oxy shares dipped after the announcement of the deal. Leading shareholders were quite vocal about their dissatisfaction. Even before the deal was accepted, many accused Hollub of empire building at the expense of shareholder value. After the deal closed, activist investor Carl Icahn filed suit against Oxy to force it to release its private records of the deal and to call a shareholder's meeting to rein in the management.
Observers wondered which of the two sides was right. Had Hollub hurt shareholder value with Oxy's ambitious deal, or had she bolstered a mid-size oil firm and made it a major player in the petroleum industry? Why didn't investors see the tremendous synergies in which Hollub fervently believed?
Publication Date: February 7, 2021
Citation: Jaan Elias, Piyush Kabra, Jacob Thomas, K. Geert Rouwenhorst, "Occidental Petroleum's Acquisition of Anadarko: The Stock Market Disapproves of Hollub's Transformational Deal, Yale SOM Case 20-034, February 7, 2021.