Warren Buffett’s Berkshire Hathaway will invest $10 billion in Occidental Petroleum, helping the oil producer in its $38bn bid for Anadarko Petroleum.
Berkshire will receive 100,000 shares of preferred stock in Occidental, according to a statement. Mr Buffett’s intervention comes a day after Anadarko agreed to serious negotiations with Occidental despite having accepted a lower $33bn offer earlier this month from Chevron.
Occidental went public with its offer last week, creating an unusual bidding war for oil assets, after being rebuffed several times by Anadarko’s board.
“Before this announcement came out, my opinion was that Chevron would have to increase their bid to be competitive,” said Bill Nygren, chief investment officer of Harris Associates, which manages $120bn and holds about a 3 per cent stake in Anadarko. “I think at this point you would consider Chevron’s bid dead.”
Some analysts were sceptical of the Occidental route before Berkshire stepped in.
"This is not a smart move on part of Occidental given the difference of size between the two companies," Raymond James analyst Muhammed Ghulam said last week.
"Chevron is much bigger and has the resources to combine the two companies and has significant deep water experience," Mr Ghulam said, referring to Anadarko's significant deep water Gulf of Mexico assets.
Chevron rose 3.1 per cent in pre-market trading in New York. Anadarko fell almost 2 per cent and Occidental dropped 2.9 per cent.
Representatives for Anadarko didn’t immediately respond to a request for comment.
Mr Buffett has been searching for ways to deploy big chunks of a cash pile that grew to $112bn at the end of 2018. The Occidental investment would make the company one of Berkshire’s 10 biggest public-company stakes.
The investment gives Berkshire dividend-paying preferred stock and warrants to buy common shares, a structure Buffett has used before in taking stakes in Bank of America and Goldman Sachs.
An Occidental corporate jet was in Omaha, Nebraska - Mr Buffett’s hometown - over the weekend, according to flight-tracking data.
