Putting Berkshire’s Cash Hoard to Work – Merger Arbitrage Mondays

Occidental Petroleum (OXY): $64.39 EV: $84.95B Instead of writing about one of the five new deals announced last week, I figured I would briefly discuss a potential pre-deal opportunity based on my observations while attending the Berkshire Hathaway annual meeting. One of the questions Warren Buffett received during the celebration of capitalism was about Berkshire’s $188 billion cash position. As is often the case, he responded that he was not too keen on putting it to work at this time (besides his treasury purchases) unless the right large opportunity presented itself. As many of us have observed over the last two years, Berkshire Hathaway has been a buyer of OXY multiple times at prices marginally below $60 per share and in a few rare instances, a little above that level. Buffett has a very good understanding of oil industry cycles and many observers widely expected him to make a bid for the full company. Following his February insider purchases, Berkshire now owns 248 million shares of OXY representing more than 28% of the company. With an enterprise value of almost $85 billion, this is a large enough purchase that could move the needle for Berkshire. Whether buying a company in...

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