Anadarko Petroleum Corp.'s (APC.N) board of directors should be ready for a backlash if the oil driller fails to accept the highest takeover offer, according to one major investor.

The ball is back in Chevron Corp.'s (CVX.N) court after Anadarko deemed a revised US$76-per-share proposal from Occidental (OXY.N) superior to a previously agreed US$65-per-share pact with Chevron. Chevron now has until May 10 to increase its bid or walk away from the industry's biggest deal in at least four years.

“We would fully expect the Anadarko board to accept the highest offer, and if that wasn’t the outcome, we would be very vocal in our dissent,” said Bill Nygren, chief investment officer of Harris Associates LP, which manages US$120 billion and owns about three per cent of Anadarko. “It would be foolish for Chevron to assume they could come underneath the Occidental bid.”

Anadarko's directors are already under “enhanced scrutiny” after they approved changes to Chief Executive Officer Al Walker’s payout a day before the deal with Chevron was announced, Nygren said. “That raised a lot of red flags.”

Now, investors are watching to see whether Anadarko accepts anything other than a matched offer from Chevron.

Nygren said any concerns about Occidental’s ability to complete the deal should be eliminated after a US$10-billion pledge from Warren Buffett and an US$8.8-billion agreement with Total SA (TOT.N) allowed the company to boost the cash portion of its bid — and got rid of the need for a shareholder vote.

“The Occidental bid is not contingent on anything at this point,” he said. “It’s so heavily cash that the Anadarko shareholder wouldn’t be hurt if Occidental’s stock fell a little bit.”

'NO CHOICE'

Still, one Occidental investor said it’s ready to vote against the board at a shareholder meeting on Friday.

“Given what we know, given the fact that the Occidental management team has refused to put this to a shareholder vote, we feel like we’re left with no choice,” said John Linehan, a portfolio manager for T. Rowe Price, which manages about US$1.1 trillion and holds a 2.8-per-cent stake in Occidental.

“It’s a transformational deal, and it needs to be put to a shareholder vote,” he said. “It has to do with what we believe is proper corporate governance, which is not happening currently at Occidental.”