Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) is committing a $10 billion investment in Occidental Petroleum Corp (NYSE: OXY) to help the complete its $38 billion bid to acquire Anadarko Petroleum Corp (NYSE: APC).
Hathaway will get 100,000 preferred shares in return for the investment, as well as warrant to buy up to 80.0 million shares of Occidental at $62.50 each. The preferred stock will accrue dividends at 8% a year.
Occidental made the announcement on Tuesday morning, saying the investment is contingent upon the company entering into and completing its proposed acquisition of Anadarko. On Monday, Anadarko said that it was considering Occidental’s bid only a few weeks after announcing that it had reached a deal with Chevron Corp (NYSE: CVX).
Chevron agreed to take over Anadarko for $33 billion at $65 a share two weeks ago as Anadarko’s board had preferred Chevron’s fit and long term value over a larger Occidental bid.
Occidental, however, went public with a bigger $38 billion offer at $76 a share last week that included more up-front cash than its earlier offers. If Anadarko walks away from its deal with Chevron, it will have to pay a $1 billion breakup fee.
Occidental president and chief executive officer said in a statement, “We have long believed that Occidental is uniquely positioned to generate compelling value from Anadarko’s highly complementary asset portfolio. We are thrilled to have Berkshire Hathaway’s financial support of this exciting opportunity.”
As of 12:05 p.m. ET, shares of Occidental traded 2.34% lower to $58.73 while Anadarko stock was down 0.66% to $72.45. Meanwhile, Chevron shares advanced 2.59% to $120.75 apiece.
Anadarko Petroleum Profile
Anadarko Petroleum, based in The Woodlands, Texas, is one of the largest independent exploration and production companies in North America. Its asset base includes conventional and unconventional properties in the U.S. and deepwater oil and gas projects in the Gulf of Mexico and Africa. At the end of 2018, proven reserves totaled 1.47 billion boe, with net production of 666 mboe/d.
Berkshire Hathaway Inc Profile
Berkshire Hathaway Inc is a holding company with a wide array of subsidiaries engaged in diverse activities. The firm’s core business segment is insurance, run primarily through Geico, General Re, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group.
The company’s second- largest segment includes Burlington Northern Santa Fe (railroad) and Berkshire Hathaway Energy (utilities and energy distributors), followed closely in size and importance by its manufacturing, service, and retailing operations.
The rest of Berkshire’s portfolio consists of its finance and financial products segment, which is involved in manufactured housing and finance, furniture rental, and rail car and other transportation equipment manufacturing, repair, and leasing.