Warren Buffett’s Berkshire Hathaway has announced its intention to acquire Occidental Petroleum’s chemical subsidiary, OxyChem, for an estimated $9.7 billion. This significant deal marks Berkshire’s largest acquisition since 2022 and underscores Buffett’s longstanding commitment to Occidental, which began in 2019 when he helped finance the company’s acquisition of Anadarko Petroleum with a $10 billion investment.
Meanwhile, Berkshire Hathaway already has a solid 28.2% stake in Occidental as of June 30. The acquisition embodies Buffett’s overall strategy of capitalizing on Occidental’s strengths, while providing a financial cushion for the large oil and gas company. Buffett just turned 95 years old and intends to retire as CEO by year’s end. In opposition to this, he recently declared his intention not to fully acquire Occidental.
The transaction is expected to finalize in Q4. It’ll allow Berkshire to build a deeper foothold in the chemical industry, a market it hadn’t entered since buying Lubrizol for roughly $10 billion in 2011. This third move is notable on many fronts, but primarily because it’s an important strategic shift for Berkshire Hathaway. With $344 billion in cash, this investment is a transformational use of that money.
In a written statement announcing the deal, Greg Abel said he was excited about bringing OxyChem into Berkshire Hathaway’s diverse family of companies. He’s set to succeed Buffett as CEO in 2026.
“We look forward to welcoming OxyChem as an operating subsidiary within Berkshire,” – Greg Abel
Abel highlighted the deal’s bottom line benefits for Occidental. He emphasized that the works’ proceeds will further bolster the company’s balance sheet, enabling it to safeguard long-term stability.
“This demonstrates our commitment to Occidental’s long-term financial stability, as demonstrated by their plan to use proceeds to reinforce the company’s balance sheet,” – Greg Abel
For Vicki Hollub, CEO of Occidental, this acquisition removes some lingering concerns over debt repayment. Now, the company is free to pursue efforts of unlocking shareholder value.
“The problem has been getting our debt down faster, so this resolves the one outstanding issue that I think will now unlock our stock and allow shareholders to feel more comfortable, hopefully, to add to their positions and others to come in,” – Vicki Hollub
She pointed out that the agreement will enable Occidental to resume its share buyback program. This represents a crowning achievement in the company’s 10-year transformation.
“So now we’re going to be able to start our sharing purchase program again….This is the last step that we needed in our major transformation that we started 10 years ago,” – Vicki Hollub
Unfortunately, earlier this week, The Wall Street Journal misreported on this transaction. At the time, it highlighted how it had the potential to create massive long-term improvements for both Berkshire Hathaway and Occidental Petroleum.