Warren Buffett’s Berkshire Hathaway is financing a bid by Occidental Petroleum for Anadarko, potentially upending Chevron’s $33 billion offer for the energy company.
Anadarko and Chevron signed a merger agreement earlier this month, but Anadarko Petroleum said Monday that it is now considering an offer from Occidental worth about $57 billion in cash and stock, including debt and book value of non-controlling interest. Chevron’s offer would be worth about $50 billion by the same metric.
When Chevron announced its bid for Anadarko on April 12, it came as a surprise to Vicki Hollub, the CEO of Occidental. She had been pursuing Anadarko for two years and was in what she considered to be friendly negotiations, although she was aware Anadarko was being targeted by another company.
“We are thrilled to have Berkshire Hathaway’s financial support of this exciting opportunity,” Hollub said Tuesday in a prepared statement. “We look forward to engaging with Anadarko’s board of directors to deliver this superior transaction to our respective shareholders.”
Anadarko revealed Monday that it was reconsidering Occidental’s bid, setting up the rare possibility of a bidding war in the oil patch. Chevron maintained Tuesday that its signed agreement with Anadarko is still superior.
The competing bids between Chevron and Occidental are an unusual turn of events for the oil and gas industry. “Even if we look back at two decades of history, this is virtually unprecedented,” said Pavel Molchanov, senior vice president and equity research analyst at Raymond James & Associates.
The entry of Buffett’s Berkshire Hathaway could give Chevron pause and that was the perception on Wall Street early Tuesday.
Shares of Chevron rose 3 percent with many investors believing it would not be laying out billions of dollars for Anadarko.
Berkshire said Tuesday it will invest $10 billion in Occidental. Berkshire will receive 100,000 preferred shares plus a warrant to purchase up to 80 million shares of Occidental common stock at an exercise price of $62.50 each. The preferred stock will accrue dividends at 8% per year. Occidental shares traded at around $58, down 2 percent, Tuesday morning.
The investment is contingent on Occidental entering into and completing its proposed acquisition of Anadarko.
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.