Warren Buffett’s Berkshire Hathaway said Thursday it will acquire Occidental Petroleum’s chemical business, OxyChem, for $9.7 billion in cash, marking its largest takeover since the $11.6 billion purchase of insurer Alleghany in 2022.
The deal adds to Occidental’s efforts to reduce its heavy debt burden and signals Berkshire’s willingness to deepen its ties with the Houston-based energy producer, where it already holds a significant stake.
Berkshire Hathaway, which held a 28.2% stake in Occidental as of June, has steadily increased its exposure to the company since early 2022.
Buffett began accumulating shares shortly after Russia’s invasion of Ukraine, capitalizing on market volatility to buy at lower prices.
“We look forward to welcoming OxyChem as an operating subsidiary within Berkshire,” said Greg Abel, Vice Chairman of Non-Insurance Operations at Berkshire, in a press release.
Abel, who will replace Buffett as CEO of Berkshire in 2026, added that Occidental CEO Vicki Hollub is showing her “commitment to Occidental’s long-term financial stability, as demonstrated by their plan to use proceeds to reinforce the company’s balance sheet.”
Share price of Occidental Petroleum Corp rose by 1.42% during premarket trading while Berkshire Hathaway fell by 0.24%.
Deal to help Occidental repair balance sheet
Occidental, one of the top US producers of basic chemicals and polyvinyl chloride, has been under pressure from the debt amassed during its $55 billion takeover of Anadarko Petroleum in 2019.
That acquisition, which helped secure some of the richest shale oilfields in Texas, left the company financially stretched.
The strain worsened with Occidental’s $12 billion purchase of CrownRock, a shale oil producer in the Permian Basin, last year.
Its debt stood at $23.34 billion at the end of June.
Proceeds from the OxyChem sale will be directed toward balance sheet repair, according to CEO Vicki Hollub, as the company refocuses on its core oil and gas operations, which accounted for 75% of earnings last year.
OxyChem’s earnings profile
OxyChem produces chemicals for water treatment, vinyl piping and medical products, and other industrial uses.
In the first half of this year, the unit generated $2.42 billion in revenue, though analysts note its free cash flow prospects have dimmed for 2025.
Occidental recently cut its pre-tax income outlook for the business to between $800 million and $900 million.
The sale represents a shift in strategy as markets had expected the company to hold on to OxyChem.
Market reaction and analyst views
Analysts at JP Morgan described the deal as a “big bang” move to deleverage Occidental’s balance sheet, while cautioning there would be trade-offs.
“We believe the transaction would be positive for the equity as a “big bang” approach to deleveraging the balance sheet in a challenging macro environment, although there are some tradeoffs,” JP Morgan said.
Analysts at TPH & Co said a $10 billion price tag “comes as a surprise” but would help reduce leverage and exceed their carrying value estimate of $8.3 billion.
“Additionally, at least in 2025, the asset will not generate significant (free cash flow)” as Occidental has already lowered its outlook for pre-tax income to between $800 million and $900 million while maintaining relatively high spending, the analysts said.
The transaction, expected to close in the fourth quarter, underscores Berkshire’s financial firepower.
The conglomerate is currently sitting on a record $344 billion in cash, giving it scope for large acquisitions even as markets remain unsettled.
For Buffett, 95, the deal may stand as one of his last significant moves before handing the reins to Abel at the end of this year, cementing Berkshire’s position as a long-term backer of Occidental’s strategy.
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