Occidental makes offer for Anadarko Petroleum

Fredrick Soto
May 4, 2019

Berkshire Hathaway Inc's plan to inject $10 billion into Occidental Petroleum Corp's takeover bid for Anadarko Petroleum Corp extends Buffett's strategy of extracting high-yielding preferred shares and stock warrants to fatten his company's bottom line.

Anadarko said it would consider a buyout offer from Occidental Petroleum.

Occidental is up against Chevron Corporation (NYSE: CVX), whose market capitalization is roughly five times bigger and boasts a larger balance sheet, CNBC said.

If it doesn't finish its deal with Chevron anadarko would have to pay a $ 1 billion breakup fee. Chevron has not responded with a counter offer.

Occidental previously announced a hostile bid to purchase Anadarko, which explores and develops petroleum and natural gas assets, topping a bid from Chevron.

Anadarko on Monday agreed to resume talks with Occidental, after the board of directors declared that the rival offer "could reasonably be expected to result in a "Superior Proposal" to Chevron's offer.

On April 24 2019, Occidental Petroleum made a proposal to acquire Anadarko for US$ 76 per share, comprised of US$ 38 in cash and 0.6094 shares of Occidental common stock per Anadarko share.

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 USA oil and gas exploration and production company.

Buffett is no stranger to making merger financing proposals of this sort, but the rate at which Occidental is having to borrow would imply that the company wants and expects Berkshire Hathaway to convert the shares quickly.

Berkshire Hathaway Inc., based in Omaha, Nebraska, owns a range of businesses including insurance, railroads, utilities, jewelry stores as well as major investments in American Express, IBM and Wells Fargo & Co.

It's not Berkshire's track record in the energy sector, however, that would be the most valuable asset to Occidental.

Analysts said Buffett's seal of approval supports Occidental's push to get the deal done but comes at a high cost. Buffett also helped Dow Chemical buy Rohm and Haas. Those include Goldman Sachs, General Electric, Harley Davidson and Bank of America. The preferred stock represents "rather expensive financing", he said in a note to clients.

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