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Buffett invests $10bn in Occidental for Anadarko bid

30th April 2019

By: Bloomberg

  

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Warren Buffett’s Berkshire Hathaway will invest $10-billion in Occidental Petroleum to help the oil producer in its $38-billion bid for Anadarko Petroleum.

Berkshire will receive 100 000 shares of preferred stock in Occidental, according to a statement Tuesday. Buffett’s intervention, which is contingent on the deal for Anadarko closing, comes a day after Anadarko agreed to serious negotiations with Occidental despite having accepted a lower offer earlier this month from Chevron.

Occidental’s smaller size and financial resources make its offer riskier for Anadarko shareholders than the $33-billion proposal from Chevron. Occidental went public with its offer last week, creating an unusual bidding war for oil assets, after being rebuffed several times by Anadarko’s board.

“Before this announcement came out, my opinion was that Chevron would have to increase their bid to be competitive,” said Bill Nygren, chief investment officer of Harris Associates, which manages $120-billion and holds about a 3% stake in Anadarko. “I think at this point you would consider Chevron’s bid dead.”

Chevron rose 3.1% in pre-market trading in New York. Anadarko fell almost 2% and Occidental dropped 2.9%.

Representatives for Anadarko and Chevron didn’t immediately respond to requests for comment.

Buffett has been searching for ways to deploy big chunks of a cash pile that grew to $112-billion at the end of 2018. The Occidental investment would make the company one of Berkshire’s ten biggest public-company stakes.

The investment gives Berkshire dividend-paying preferred stock and warrants to buy common shares, a structure Buffett has used before in taking stakes in Bank of America and Goldman Sachs.

An Occidental corporate jet was in Omaha, Nebraska – Buffett’s hometown – over the weekend, according to flight-tracking data.

Edited by Bloomberg

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