Warren Buffett was not expected to bid for control of The West after agreeing to a larger stake

Analysts said Occidental’s oil business would complement Berkshire’s existing energy holdings, which include utilities, natural gas and renewables. Mr. Buffett has an intimate relationship with CEO Vicki Hollub and Her efforts have been publicly praised To change the course of the company after its acquisition of Anadarko Petroleum Corp. And its plans to pay off debts and increase dividends.

But Mr. Buffett did not tell Occidental of any plans to take a controlling stake in the company, according to people close to the matter. Given Mr. Buffett’s well-known aversion to making hostile deals, it would be unnatural for him to make an offer without first revealing to the company’s executives and directors.

Having such a large stake – Berkshire is Occidental’s largest shareholder – gives him such a huge sway over the company already, and gaining control could cost him a significant premium over the current share price. The stock closed Friday at $71.29, up nearly 10% on the news, giving the company a market capitalization of about $66 billion.

Why is Berkshire seeking permission to buy more Occidental, then?

For one, he was about to run against the investment limits imposed by FERC.

The filings show that Berkshire currently owns a 20% stake in Occidental. It also has guarantees to buy another 83.9 million common shares and 100,000 shares of huge dividend-paying preferred stock – both of which it acquired after helping Occidental Finance Its 2019 acquisition of Anadarko.

If Berkshire were to exercise the warrants, its stake would rise to nearly 27%. That would have exceeded the 25% limit allowed by FERC before Friday’s ruling.

“This is not a company that is going to create trouble for regulators,” said Kathy Seifert, an analyst at CFRA Research.

It should also give Berkshire some breathing room in the event that stock buybacks or other company moves reduce the amount of shares outstanding, thereby increasing its percentage stake.

There are other reasons to suspect that a Berkshire takeover of Occidental is imminent.

One of them is price, said David Cass, professor of finance at the University of Maryland’s Robert H. Smith School of Business.

So far, Berkshire has bought virtually all of its shares in Occidental for between $50 and $60, Cass said. According to the filings, the highest price Berkshire paid was $60.37 in July.

Cass said Buffett is well known as a bargain hunter, so it’s hard to imagine Berkshire’s rush to buy more Occidental shares at the current price. Shares are up 146% for the year, buoyed by higher oil prices, compared to an 11% drop for the S&P 500.

People familiar with the deliberations at Occidental said the company’s leadership believed Buffett might consider making a bid if oil prices fell, sending Occidental’s share price down. One person said that if Mr. Buffett made an offer the company deemed fair, the majority of Occidental’s board would likely agree to make it to shareholders.

Mr. Buffett did not respond to a request for comment. An Occidental spokesperson declined to comment.

Mr. Buffett is currently represented as a passive shareholder in Occidental, based on a so-called 13G filing with the US Securities and Exchange Commission. If he is to change his intentions and have meaningful discussions with the company about a full acquisition, he will likely need to change his file to 13D, which is required by major shareholders who intend to actively participate in the management of a company.

Taxes could also play a role in Mr. Buffett’s bid to acquire a larger minority stake in Occidental. Companies that own at least a 20% stake in another company are eligible to deduct 65% of the dividends received, up from the standard 50%.

Berkshire’s 20% stake also allows for a proportionate share of Occidental’s profits to be included in its own results. That could give its earnings a billion-dollar-a-year boost, based on analyst estimates of Occidental’s earnings. Prior to the recent purchases revealed this month, Occidental had slipped below the 20% threshold for both features.

Since Berkshire began buying Occidental shares in February, Buffett has developed a cordial and cooperative relationship with Ms. Hollub, and the pair speak regularly, according to people familiar with the matter.

When Mr. Buffett bought another Occidental Alloy stock this spring, he called Ms. Hollub to notify her of the deal, according to one of the people. The person said Ms. Hollub was driving at the time and stopped to take the call.

Mr. Buffett’s message was simple: “Keep doing what you’re doing,” he told Mrs. Hollub.

The growing ties between Berkshire and Occidental have an unexpected connection to Mr. Buffett’s early days of investing.

At the age of eleven in 1942, Mr. Buffett made his first investment: three Cities Service Preferred Stocks. Forty years later, Occidental went on to acquire the oil company, which Mrs. Hollub had just joined the previous year.

Cass said Buffett’s investment in Occidental this year shows his first stock purchases “will be completed in 80 years.”

Benoit Maureen contributed to this article.

write to Akane Otani at [email protected], Christopher M Matthews at [email protected] and Cara Lombardo at [email protected]