Tuesday, April 30, 2019

Warren Buffett is taking sides in the bidding war for the energy giant Anadarko (BRK.A, APC, OXY)

Warren Buffett

  • Warren Buffett's Berkshire Hathaway is joining Occidental Petroleum's bid for Anadarko by offering $10 billion in financing.
  • Occidental's $38 billion bid topped a $33 billion takeover proposal by the oil major Chevron.
  • Occidental's shares dropped 4% early Tuesday.
  • Watch Anadarko Petroleum trade live.

Berkshire Hathaway, the investment conglomerate controlled by Warren Buffett, has committed to provide $10 billion in financing for Occidental Petroleum's $38 billion bid for Anadarko Petroleum. The investment is contingent on the completion of the acquisition, according to a press release from Occidental.

Occidental previously announced a hostile bid to purchase Anadarko, which explores and develops petroleum and natural-gas assets, topping a bid from Chevron. Occidental made a proposal on April 24 to acquire Anadarko for $76 a share, financed by a mixture of cash and stock.

On Monday, Anadarko announced that its board planned to pursue Occidental's bid, shunning Chevron. Chevron has not responded with a counteroffer.

The terms of Berkshire's contingent financing are as follows:
  • Berkshire Hathaway will provide $10 billion worth of preferred shares to Anadarko, with dividends of 8% per annum. Should the company not pay dividends in a particular year, the owed dividends will accrue at 9% per annum.
  • In addition, Berkshire will receive warrants to purchase 80 million shares of Occidental common stock at an exercise price of $62.50, a 4% premium to Monday's closing price.
  • The preferred shares can be redeemed after 10 years for a 5% premium, including any unpaid dividends.
Occidental's shares dropped over 4% in early trading Tuesday. Anadarko 's stock was flat on the news of Buffett's involvement.

Anadarko shares are up 65% this year.

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