Buffett invests $10bn in Occidental for Anadarko bid

Jeannie Matthews
May 4, 2019

Now, the legendary investor Warren Buffett has placed his bet with a US$10 billion investment through his firm Berkshire Hathaway.

As a result, Anadarko on Monday agreed to start talking to Occidental, saying its bid could potentially be superior to Chevron's existing deal to buy Anadarko for $33 billion in cash and stock.

Buffett's imprimatur is apparently valuable to Occidental Chief Executive Officer Vicki Hollub: The 8% that'll be paid out on the preferred shares is more than twice the average coupon on Occidental's debt.

There is no certainty that Occidental, which was vying for Anadarko before Chevron clinched its deal, will be able to secure its own deal, the sources said.

Following the announcement of the Chevron offer, the SEC said, the options buyers profited by either selling contracts at a profit or exercising the options to acquire large positions of Anadarko stock at steep discounts.

Berkshire will receive 100,000 shares of preferred stock in Occidental, according to a statement.

He will likely be questioned about Occidental and Berkshire's cash at his company's annual meeting on Saturday in Omaha, Nebraska, which typically draws more than 40,000 people. But Occidental countered last week with a $38 billion offer; the equivalent of $76 a share, half in cash and half in Occidental stock. Chevron has more financial resources than its rival Occidental.

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"This is one of the best things Berkshire could do", said Steven Check, president of Check Capital Management Inc in Costa Mesa, California, which invests one-sixth of its $1.5 billion of assets in Berkshire.

Occidental will engage with Anadarko's board of directors to "deliver this superior transaction to our respective shareholders".

The news comes a day after Anadarko said it will resume negotiations with Occidental, after it trumped Chevron's $65 a share offer for the United States oil and gas exploration and production company.

Berkshire Hathaway has significant energy investments, but they are mostly in power generation and transmission.

Analysts said Buffett's endorsement supports Occidental's push to get the deal done but comes at a high cost.

There have been other deals where Berkshire offered financing on preferred terms to companies that weren't associated with a deal.

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