Berkshire (BRKA, BRKB) to invest $10 billion in Occidental Petroleum (OXY, $57.42)

Warren Buffet’s Berkshire Hathaway Inc. confirmed that it has committed to invest $10 billion in Occidental Petroleum Corporation, contingent upon the latter’s entry and completion of its proposed acquisition of Anadarko Petroleum Corporation.

As part of an investment, Berkshire will receive 100,000 shares of a cumulative perpetual preferred stock valued at $100,000 a share. It will also receive a warrant to buy up to 80 million shares of Occidental's stock at an exercise price of $62.50. The preferred stock will accrue dividends at 8%/year.

Occidental is apparently thrilled to receive the financial support of Berkshire. Occidental believes that its acquisition of Anadarko is crucial as it will benefit immensely from the latter’s highly complementary asset portfolio. As such, Berkshire’s support will lift Occidental’s chances to finish the proposed acquisition of Anadarko. This support is very much essential for Occidental, as it is up against another oil giant, Chevron (CVX), who has fives time bigger market cap and a larger balance sheet.