US Billionaire Backs Oxy Bid for Anadarko
US investor Warren Buffett has backed Occidental Petroleum's bid for Anadarko, pledging some $10bn in financing if the deal goes through. The deal would make the new entity the third largest US oil and gas producer, but it faces opposition from Chevron. The other US company also has eyes on Anadarko's Mozambique LNG project, but it made a lower bid.
Oxy CEO Vicki Hollub said April 30: “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.”
Buffett's fund has committed to invest a total of $10bn in Occidental, if it completes the Anadarko purchase. The fund will receive 100,000 shares of cumulative perpetual preferred stock with a liquidation value of $100,000/share, together with a warrant to purchase up to 80mn shares of Occidental common stock – about 11% of its equity – at an exercise price of $62.50. The preferred stock will accrue dividends at 8% /yr – or with respect to dividends that are accrued and unpaid, 9%/yr.
On April 24, Oxy made a proposal to acquire Anadarko for $76.00/share, comprised of $38.00 in cash and 0.6094 shares of Oxy common stock/Anadarko share. On April 29, Anadarko announced that its board had determined that the proposal from Oxy could reasonably be expected to result in a superior proposal under its existing merger agreement and that it would engage with Oxy.
Oxy had earlier criticised Anadarko for rejecting its advances that, it said, were more attractive than Chevron's. According to the Financial Times May 1, however, the 8% dividend looks expensive, compared with 3.4% payable on ten-yr bonds.