In a move that's sending ripples through the energy sector, Berkshire Hathaway has agreed to acquire Occidental Petroleum's chemical unit, OxyChem, for $9.7 billion in cash. The announcement came Thursday, marking what could be one of Warren Buffett's final big splashes before he steps down as CEO at year's end. Occidental, already a key holding for Berkshire with a 28.2% stake as of June, is offloading the division to trim debt and sharpen focus on its core oil and gas operations.
Indeed, the deal represents Berkshire's largest purchase since snapping up insurer Alleghany for $11.6 billion back in 2022. With $344 billion in cash reserves—near an all-time high—the conglomerate seems poised to deploy capital amid a landscape of cautious investing. For Occidental, the sale brings in much-needed funds; the company plans to use about $6.5 billion to pay down debt piled up from past acquisitions. OxyChem, known for producing chemicals in water treatment and healthcare, has been a steady earner, but analysts note it might not fetch the $12 billion some had valued it at.
However, the news wasn't all positive for Occidental's stock. Shares dropped more than 7% Thursday following the reveal, as investors worry about losing a diversified revenue stream in volatile oil markets. Berkshire, on the other hand, gains a resilient business with high barriers to entry, fitting Buffett's long-term value play. Moreover, this transaction underscores Berkshire's deepening ties to Occidental, though Buffett has repeatedly said he won't seek full control.
But what does this mean for the broader picture? Occidental's CEO Vicki Hollub emphasized the strategic pivot toward upstream energy, yet the petrochemical exit could expose the firm more to commodity price swings. And as Berkshire integrates yet another asset, questions linger on how Greg Abel, Buffett's successor, will steer the ship.
In the end, this $9.7 billion handshake might just reshape how we view the intersections of energy and investment giants.