Warren Buffett’s Berkshire Hathaway Inc. will invest US$10 billion in Occidental Petroleum Corp., helping the oil producer in its US$38 billion bid for Anadarko Petroleum Corp.
Berkshire will receive 100,000 shares of preferred stock in Occidental, according to a statement Tuesday. Buffett’s intervention comes a day after Anadarko agreed to serious negotiations with Occidental despite having accepted a lower offer earlier this month from Chevron Corp.
I think at this point you would consider Chevron’s bid dead
Bill Nygren, chief investment officer of Harris Associates
Occidental’s smaller size and financial resources make its offer riskier for Anadarko shareholders than the US$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 US$120 billion and holds about a 3 per cent stake in Anadarko. “I think at this point you would consider Chevron’s bid dead.”
Chevron rose 3.1 per cent in pre-market trading in New York. Anadarko fell almost 2 per cent and Occidental dropped 2.9 per cent.
Representatives for Anadarko didn’t immediately respond to a request for comment.
Buffett has been searching for ways to deploy big chunks of a cash pile that grew to US$112 billion at the end of 2018. The Occidental investment would make the company one of Berkshire’s 10 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 Corp. and Goldman Sachs Group Inc.
An Occidental corporate jet was in Omaha, Nebraska — Buffett’s hometown — over the weekend, according to flight-tracking data.
With assistance from Katherine Chiglinsky
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