In a swift move that underscores Warren Buffett's enduring appetite for industrial assets, Berkshire Hathaway has agreed to purchase Occidental Petroleum's OxyChem unit for $9.7 billion in cash. The announcement, dropping on Thursday, marks one of the conglomerate's largest acquisitions in recent years, coming just months before Buffett hands over the reins as CEO at year's end. Occidental, long a favorite in Buffett's portfolio, will offload its petrochemical arm to trim down its debt load, a strategy that's been in the works amid fluctuating oil prices.
Indeed, the deal isn't entirely surprising. Berkshire already owns a substantial 28.2% stake in Occidental, built up over years of strategic buys. OxyChem, which churns out chemicals for everything from water treatment to healthcare applications, has been a steady earner for the Houston-based oil giant. Yet, with Occidental's balance sheet still reeling from past takeovers like the massive Anadarko purchase, this sale feels like a pragmatic step. The company plans to channel $6.5 billion of the proceeds straight to debt repayment, potentially easing investor worries about leverage in a volatile energy sector.
However, the market's reaction was less than enthusiastic. Occidental's stock plunged more than 7% in early trading following the news, dipping below recent highs. Analysts are split—some see the price tag as a bargain for Berkshire, given OxyChem's estimated value closer to $12 billion, while others fret that losing this diversified revenue stream leaves Occidental more exposed to crude oil swings. For Berkshire, sitting on a hefty $344 billion cash pile, this fits the mold of Buffett's value-hunting playbook, snapping up a resilient business with high entry barriers.
Moreover, as Buffett, now 95, steps back, this transaction hints at a transitional phase for the Berkshire empire. Greg Abel, the incoming CEO, could be signaling continuity in deal-making. Still, questions linger about how this reshapes Occidental's path forward in a decarbonizing world.
What remains clear is that in the cutthroat world of energy investments, such maneuvers keep the stakes high for all involved.