Berkshire Hathaway's proposed investment in Occidental is basically funding what some see as a hostile takeover bid.
In this case, Berkshire will invest $10 billion in Occidental in exchange for 100,000 shares of cumulative perpetual preferred stock, contingent on Occidental's successful acquisition of Anadarko. The deal also includes warrants to buy 80 million shares of Occidental common stock.
Buffett told shareholders just last year that Berkshire doesn't have an appetite for unfriendly deals. "Well, we will not make hostile tenders ourselves. I do not believe that there's anything fundamentally wrong with the idea. I mean, if you take the Fortune 500 companies, I'm sure that all 500 are not managed by the best, or in some cases even the friendliest to investor managements in the world," Buffett.
So far, Chevron is sticking with its deal. "We believe our signed agreement with Anadarko provides the best value and the most certainty to Anadarko's shareholders," the company said. Shields also said the big deal could be in any industry, and Buffett is not necessarily signaling a big energy buy. "That could be almost anything. It could be energy but when we're talking about over 100 billion in cash and they're putting $15 billion into this deal. That leaves a lot of dry powder for other things," he said.
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