Buffett doubles down on Occidental; Manchester United in play; Unity shrugs off AppLovin bear hug; Tencent looks to shed Meituan stake; and much more
Happy Friday!
To say Warren Buffett loves Occidental Petroleum would be the understatement of the century – weeks after Berkshire Hathaway applied to increase its stake in the Houston-based oil company, the U.S. energy regulator gave the company controlled by the billionaire permission to buy up to 50% of Occidental’s common stock.
Occidental has long-standing ties with the “Oracle of Omaha” – back in 2019, Buffett helped bankroll Occidental CEO Vicki Hollub’s pursuit of Anadarko Petroleum, helping her win the deal in the eleventh hour after an intensely heated takeover battle against oil major Chevron. (Buffett currently holds a $23.7 billion stake in Chevron).
Occidental's share price soared 9.9%, after the Federal Energy Regulatory Commission (FERC) said letting Berkshire add to its 20.2% stake was "consistent with the public interest."
Berkshire had applied to increase its stake on July 11, saying it would not hurt competition, undermine regulatory authority, or boost costs for consumers. FERC regulates the interstate transmission of electricity, natural gas and oil.
The share price of Houston-based Occidental has more than doubled this year, benefiting from rising oil prices following Russia's Feb. 24 invasion of Ukraine. Berkshire began buying Occidental shares four days later.
Buffett's Omaha, Nebraska-based conglomerate also owns $10 billion of Occidental preferred stock, which helped finance the 2019 purchase of Anadarko, and has warrants to buy another 83.9 million common shares for $5 billion.
Given’s Buffett’s existing stakes in both Chevron and Occidental, could we witness a mega merger between the two somewhere down the line? We’ll see. Watch this space for more. This story ain’t over yet.
Elsewhere, Elon Musk was in the news again, albeit for entirely different (and not surprisingly, controversial) reasons – Musk briefly lifted the gloom over Manchester United's shares and fans by tweeting he was buying the English soccer club - only to say a little later it was all part of "a long-running joke".
One of the world's most successful soccer clubs, the "Red Devils" are languishing at the bottom of England's Premier League and, having seen eight coaches come and go in less than 10 years, some fans and investors are wondering whether it's time for the club's owners, the American Glazer family, to sell.
British billionaire Jim Ratcliffe's interest in buying Manchester United has raised the hopes of the club's supporters that their American owners, the Glazer family, might now sell the club and pave the way for a return to glory on the field.
Whether that happens will depend on three key factors: how much they think the club is worth; whether there are potential buyers willing to pay that price; and finally, if the much-criticised Glazers are willing to take the money and leave.
So far, there has been no indication from the publicity-shy Glazers that the club is up for sale or that they would be willing to engage with an offer.
There have, however, been reports that they might be interested in selling a portion of shares to a potential minority investor.
But the fans, who are set to protest against the Glazers again at Monday's Premier League clash with old rivals Liverpool, are hoping for much more radical change than a new junior-partner owner.
With the club not having won a title since Alex Ferguson retired as manager in 2013 and recently having lost all sense of direction, finishing sixth last term and losing their opening two games of this season, there have been renewed calls for a change of ownership.
My colleagues in Hong Kong, Julie Zhu and Kane Wu, scooped that China's Tencent plans to sell all or a bulk of its $24 billion stake in food delivery firm Meituan to placate domestic regulators and monetise an eight-year-old investment.
Tencent, which owns 17% of Meituan, has been engaging with financial advisers in recent months to work out how to execute a potentially large sale of its Meituan stake.
The planned sale comes against the backdrop of China's sweeping regulatory crackdown since late 2020 on technology heavyweights that took aim at their empire building via stake acquisitions and domestic concentration of market power.
That crackdown, which has led to billions of dollars in fines for the Chinese tech giants, is reshaping the companies by forcing them to make multi-billion dollar divestments. Tencent, for instance, is exiting a clutch of businesses now and pivoting towards the global gaming market. (Full Story)
The owner of China's No. 1 messaging app WeChat first invested in Meituan's rival Dianping in 2014, which then merged with Meituan a year later to form the current company.
Based on Meituan's market capitalisation as of Monday, Tencent's 17% stake is worth $24.3 billion.
Elsewhere, Saaed Azhar, Davide Barbuscia and I reported that top U.S. and European banks are facing tougher times in the riskiest parts of the loan market.
The biggest U.S. lenders, including Bank of America and Citigroup, wrote down $1 billion in the second quarter on leveraged and bridge loans as rising interest rates made it tougher for banks to offload debt to investors and other lenders.
The pain has also spread across the Atlantic, after European lenders such as Deutsche Bank and Credit Suisse reported losses for such exposure.
Large U.S. and European banks are on track to lose $5 billion to $10 billion more in coming quarters on leveraged loans they have committed to underwrite, according to bankers and analysts.
And finally, gaming software maker Unity Software rejected AppLovin Corp's $17.54 billion takeover offer and said it would go ahead with its planned purchase of ironSource.
AppLovin, which competes with ironSource in helping developers grow and monetize their apps, offered to buy Unity in an all-stock deal last week on the condition that it drops the $4.4 billion bid for Tel Aviv-based ironSource.
Unity said AppLovin's offer was not in the best interest of shareholders and decided it would not qualify as a "Superior Proposal" as defined in Unity's merger agreement with ironSource.
Will AppLovin come back with a sweetened offer? We’ll keep you posted when we hear more.
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And here’s a quick recap of the other highlights of the Reuters corporate finance file this week:
Kimmeridge Energy Management confirmed it has amassed a stake in California Resources and is engaging with the oil and gas producer to make changes that include selling some acreage to real estate developers.
Turquoise Hill Resources rejected an offer by majority shareholder Rio Tinto to buy the 49% stake it doesn't already own for $2.7 billion, as it did not reflect the Canadian company's full and fair value.
British billionaire Jim Ratcliffe is interested in buying Manchester United, a source familiar with the matter told Reuters after Elon Musk said his plan to buy the Premier League club was all part of "a long-running joke".
Billionaire entrepreneur Elon Musk, who is attempting to walk away from his deal to acquire Twitter, is seeking documents from advertising technology firms as part of his quest to gain more information on bot and spam accounts on Twitter, according to filings in a Delaware court.
Just Eat Takeaway shares jumped as much as 40% on Friday after the loss-making company boosted its finances by agreeing to sell its stake in Brazil's iFood to technology investor Prosus for up to 1.8 billion euros ($1.8 billion).
British cybersecurity firm Darktrace said it was in the early stages of discussions with tech investment firm Thoma Bravo regarding a possible cash offer.
Canada's Home Capital Group said that its board had rejected an unsolicited takeover bid from an unnamed buyer as it undervalued the mortgage lender.
Apollo Global Management said it had invested $785 million in GI Alliance, as part of a deal that values the gastroenterology-care platform at $2.2 billion.
Thank you for reading this week’s edition! Please do share the newsletter with anyone you think might be interested – feedback will be most welcome.
Have a great weekend!
Warm regards,
Anirban?
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Anirban Sen
Editor in Charge, U.S. Mergers & Acquisitions
Thomson Reuters
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