Buffett's Berkshire Hathaway to invest $10 billion in Occidental Petroleum for Anadarko takeover
PUBLISHED 12 MINS AGO UPDATED 2 MINS AGO
Tom DiChristopher
@tdichristopher
CNBC.COM
Warren Buffett is getting involved in a rare bidding war unfolding in the energy industry.
Berkshire Hathaway has committed a $10 billion investment in Occidental Petroleum contingent on the company completing its proposed takeover of Anadarko Petroleum. Last week, Occidental made a rival bid for the oil and gas driller, challenging Chevron's $33 billion buyout of Anadarko.
The capital injection from Berkshire could make Occidental a more formidable suitor. In pursuing Anadarko, Occidental is going toe-to-toe with an oil major with a much bigger balance sheet and whose market capitalization is nearly five times its value.
Here's how the deal is structured:
Berkshire will receive 100,000 shares of cumulative perpetual preferred stock with a value of $100,000 a share.
The conglomerate also gets a warrant to purchase up to 80 million shares of Occidental at an exercise price of $62.50 a share.
The preferred stock will accrue dividends at 8% annually.
"We are thrilled to have Berkshire Hathaway's financial support of this exciting opportunity," said Occidental CEO Vicki Hollub in a press release.
Several analysts initially downgraded shares of Occidental following its rival bid, with many saying the buyout would carry more risks than Chevron's proposed takeover of Anadarko. Achieving the benefits of the deal in part depends on Occidental's successful divestment in $10-$15 billion in assets.
Occidental shares closed Monday at $60.13. Anadarko closed at $73.32, just below the $76 cash and stock offer by Occidental for the company.
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