In a move that underscores Warren Buffett's enduring knack for value plays, Berkshire Hathaway announced Thursday it will acquire Occidental Petroleum's OxyChem unit for $9.7 billion in cash. The deal, finalized just days after reports of intense negotiations, marks Berkshire's largest purchase since snapping up Alleghany for $11.6 billion back in 2022. Occidental's shares promptly dipped more than 7% in trading, reflecting some investor unease over the loss of a steady chemical cash cow.
Indeed, OxyChem has long been a reliable earner for Occidental, churning out chemicals for water treatment, healthcare, and industrial uses—products with barriers to entry that Buffett himself might appreciate. Yet here, Occidental's CEO Vicki Hollub is offloading it to trim debt, planning to funnel $6.5 billion of the proceeds straight into repayments. Berkshire, already holding a hefty 28.2% stake in Occidental as of June, isn't stopping there; this buyout tightens its grip on the oil major without full takeover, a strategy Buffett has coyly defended despite his impending CEO handover to Greg Abel by year's end.
However, the timing raises eyebrows. With Berkshire sitting on a staggering $344 billion cash pile—near record levels—the acquisition feels like a classic Buffett bet on durable assets amid market jitters. Occidental, burdened by years of aggressive buys like its CrownRock deal, gets a financial breather, but critics whisper that $9.7 billion undervalues OxyChem, which some analysts pegged closer to $12 billion. Moreover, stripping away this diversification leaves Occidental more exposed to volatile oil prices, a risky pivot in an era of energy transitions.
Still, for Berkshire, it's another feather in a cap that's seen few peers in recent years. As Buffett, now 95, steps back, this transaction hints at a seamless shift, blending old-school opportunism with fresh oversight. One can't help but wonder how such maneuvers will shape the conglomerate's path in the years ahead.