Warren Buffett’s Berkshire Hathaway (BRK.B) has been given regulatory approval to purchase
up to 50% of oil giant Occidental Petroleum’s (OXY) outstanding shares.
Shares of Occidental Petroleum rose 10% on the news to close trading last Friday (August 19)
at $71.29 U.S., pushing the stock’s gains this year to 130%.
Berkshire Hathaway filed an application with the Federal Energy Regulatory Commission to buy
more of the oil company’s common stock in secondary market transactions. Buffett argued in
the application that a maximum 50% stake wouldn’t hurt competition.
The regulator gave Berkshire Hathaway permission to buy half of Occidental Petroleum, saying
the increased stake was “consistent with the public interest.”
Berkshire Hathaway currently owns 188.5 million shares of Occidental, equal to a 20.2% stake,
which enables Buffett’s company to record some of the oil concerns earnings with its own,
potentially adding billions of dollars in profits to Berkshire’s balance sheet.
Berkshire also owns $10 billion U.S. of Occidental Petroleum’s preferred stock and has warrants
to buy another 83.9 million common shares for $5 billion U.S., or $59.62 U.S. a share.
News that Berkshire Hathaway is moving to acquire 50% of Occidental’s stock has increased
speculation that Buffett plans to acquire the entire oil company. To date, Berkshire’s maximum
purchase price for Occidental Petroleum’s stock has been $60.37 U.S. per share.
Occidental has been the best-performing stock in the benchmark S&P 500 index so far this
year, rising along with oil prices.
Buffett’s stake in Occidental Petroleum has inspired retail investors to also buy shares of the oil
giant, according to data from VandaTrack.
Year-to-date, Berkshire Hathaway’s Class B stock is down 1% and trading at $297.28 U.S. per
share.
