Warren Buffett is taking sides in the bidding war for energy giant Anadarko
- Warren Buffett's Berkshire Hathaway is joining Occidental Petroleum's bid for Anadarko by providing $10 billion in financing.
- Occidental's $38 billion bid for topped a $33 billion takeover proposal by the oil major Chevron.
- Occidental's shares dropped 4% early Tuesday.
- Watch Anadarko Petroleum trade live.
Berkshire Hathaway, the investment conglomerate controlled by Warren Buffett, has committed to provide $10 billion in financing for Occidental Petroleum's $38 billion bid for Anadarko Petroleum. The investment is contingent on the completion of the acquisition, according to a press release from Occidental.
Occidental previously announced a hostile bid to purchase Anadarko, which explores and develops petroleum and natural gas assets, topping a bid from Chevron. Occidental made a proposal on April 24 to acquire Anadarko for $76 a share, financed by a mixture of cash and stock.
On April 29, Anadarko announced that its board announced it would pursue Occidental's bid, shunning Chevron. Chevron has not responded with a counter offer.
The terms of Berkshire's contingent financing are as follows:
- Berkshire Hathaway will provide $10 million of preferred shares to Anadarko, with dividends of 8% per annum. Should the company not pay dividends in any particular year, the owed dividends will accrue at 9% per annum.
- In addition, Berkshire will received warrants to purchase 80 million of Occidental common stock at an exercise price of $62.50, a 4% premium to Monday's closing price.
- The preferred shares can be redeemed after a term of ten years for a 5% premium, including any unpaid dividends.
Occidental's shares dropped over 4% in early trading Tuesday. Anadarko 's stock was flat on the news of Buffett's involvement.
Anadarko shares are up 65% this year.
