Berkshire Hathaway has committed an equity investment of $10bn in Occidental Petroleum should the latter enter into an agreement to acquire Anadarko Petroleum and close the transaction.
Last week, Occidental proposed to acquire Anadarko Petroleum for $57bn through a cash-cum-stock transaction. The offer from the company came days after Anadarko Petroleum entered into an agreement with Chevron to be acquired by the latter in a deal valued at $50bn.
Berkshire Hathaway’s investment in Occidental is expected to help in the financing of the acquisition of Anadarko Petroleum.
The conglomerate will be issued 100,000 shares of Occidental’s cumulative perpetual preferred stock with a liquidation value of $100,000 per share, along with a warrant to buy up to 80.0 million shares of common stock at an exercise price of $62.50 per share.
Occidental president and CEO Vicki Hollub said: “We have long believed that Occidental is uniquely positioned to generate compelling value from Anadarko’s highly complementary asset portfolio. We are thrilled to have Berkshire Hathaway’s financial support of this exciting opportunity.
“We look forward to engaging with Anadarko’s Board of Directors to deliver this superior transaction to our respective shareholders.”
Earlier this week, Anadarko Petroleum expressed its interest in Occidental’s takeover proposal and declared its intentions to resume negotiations. Its board of directors concluded that the proposal could reasonably be superior in comparison to its pending transaction with Chevron.
The Texas-based oil and gas firm also said that Occidental’s proposal reflects significant improvement on the basis of indicative value, terms and conditions apart from having closing certainty, when compared to previous offers from the same company.
As per the offer, Andarko Petroleum will be paid $76 per share, which will comprise $38 in cash plus 0.6094 of Occidental’s shares. The amount covers assumption of Anadarko Petroleum’s net debt.
Occidental expects the proposed merger with Andarko Petroleum to boost its position as the largest producer in the Permian Basin, with a consolidated production of 533 thousand Boe/d. The company also believes that the merger will bring together leading assets and best-in-class economics, which will help in accelerating its value-driven strategy in the US onshore sector.