Very interesting morning APC family.
Potential game changing interjection by the Wizard of Omaha.
Vicki phoned a friend people...
Will Chevron finally transfer money from savings to checkings?
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Oxy most certainly does not need the headcount (Unlike Anadarko they didn’t lay-off in the downturn— they have all the talent they need). They’ve promised Wall Street far more “Synergies” in terms of G&A dollars than Chevron has. Also, they need the cash to assure investors the dividend is safe. Without a doubt, Oxy will eliminate more people and backoffice costs. Also, they are going to sell almost every asset other than Permian. Simply can’t justify keeping folks when you sell the assets they worked.
CVX has a lot more employees. More redundancy means more APC cuts. Oxy needs the headcount and will probably let more APC employees stay in the Woodlands until their westside campus is ready. But Oxy will sell Moz immediately and the whole LNG group are walking dead. We have the obnoxious Moz'ers anyway.
Chevron seems safer for APC employees than Oxy...
So what's Icahn's angle? He won't show his hand. He won't play nice with the others. It is likely he is evaluating multiple opportunities to extract some value for himself and the others who side with.
He has a history with Texaco and Phillips. His Viet Nam was TWA, so having a long-term stake in running the company seems unfulfilling. Bankruptcies like Marvel Comics are too expensive and hard to control.
It seems like a breakup of Oxy by Oxy's own board--that Icahn wants to get in the middle of--is unlikely. But I can't say for sure. Has Oxy been shuffling its portfolio like APC has been for 3 years with an obvious eye toward putting itself up for sale? Sell one asset, sell them all, as far as the board is concerned. Maybe Shell or COP want pieces.
It seems to me that it is most likely Icahn sees the shareholder insurgency against APC and especially against the Buffett preferred as an opportunity. He could let that insurgency build or he could be an activist himself. But his very presence is a catalyst. He scares some people. He emboldens those who side with him or who think they are on his side.
In the short term, the result is either greenmail/standstill to buyout Icahn's small stake, OR the whole Oxy-APC deal falls apart and Oxy's share price rebounds. Possible short term profit for Icahn either way.
But if Icahn is not bought out, regardless of whether the APC and Buffet deals are consummated or fall apart, he will build his stake and ride the shareholder discontent until he extracts more value as an activist.
So the odds shift back to Chevron to buy APC. Not the better choice for most employees unless you want the package.
If Icahn stays involved, the odds of long term shakeup at Oxy go up. Whether Icahn captures all the resulting value depends on what deal Icahn and the board reach, and how much the other shareholders get involved on who's side. Read your Berle Means.
Great. No party is complete without Icahn sneaking in through the bathroom window...
8% is high but it is permanent risk capital. Doesn't have to be paid back. Doesn't raise bankruptcy risk. Improves balance sheet and financial covenants. Allows current debt levels to be paid down. Aligns Oxy with Bershire for future deals. And it is money in hand now when it is needed.
I would expect the OXY CEO and CFO to have an idea of what the going interest rate is and not lift their skirts for BH.
To Osk, the $10 billion investment is contingent on Oxy completing the acquisition of Anadarko. The money will assist in the acquisition payment and in return, Berkshire Hathaway will receive 100,000 preferred shares at 8% dividend. This is all about BH making good investment return on their money. What else do you expect?
Uh-oh, Warren crashed the party. Hide the liquor.
Wow. Your an id--t. Warren buffet found a way to screw oxy shareholders and make a profit whether oxy fails or does well. Market rates at 4-5% funding. 8% is high, equity kicker is crazy.
Berkshire Hathaway to invest $10 billion in Oxy and receive 100,000 preferred shares paying 8% dividend. This investment is to assist Oxy in its acquisition of Anadarko. Warren Buffett believes Oxy is the better company to extract value (oil) from the Permian assets of Anadarko. This will probably put an end to the Chevron offer.
That probably included the BH offer to Oxy.
They talk about two more suitors (on cnbc this morning)
Yeah but which side has the dragons?
Market at its best.
Chevron is out and so is 75% of our staff. Buffet is a snake and this is expensive capital.