In a significant shake-up for the energy sector, Berkshire Hathaway has agreed to acquire Occidental Petroleum's chemical subsidiary, OxyChem, for $9.7 billion in cash. The deal, announced Thursday, marks one of Warren Buffett's final big swings before he steps down as CEO at year's end. Occidental, long a favorite of Buffett's, will use much of the proceeds—about $6.5 billion—to trim its debt pile, a move that's been on the horizon amid years of aggressive acquisitions.
However, the news wasn't all smooth for Occidental's stock. Shares dipped more than 7% in early trading, reflecting investor concerns over losing a steady cash generator like OxyChem, which produces everything from water treatment chemicals to industrial basics. Berkshire, sitting on a hefty $344 billion cash hoard, sees this as a low-risk add to its portfolio, fitting Buffett's style of snapping up resilient businesses. Indeed, the conglomerate already owns a 28.2% stake in Occidental, worth billions, but has repeatedly said it won't take full control.
The transaction values OxyChem at what some analysts call a bargain—below earlier estimates of $12 billion—potentially signaling Berkshire's shrewd negotiating power. For Occidental, led by CEO Vicki Hollub, this divestiture sharpens focus on its core oil and gas operations, especially as energy prices fluctuate wildly. Moreover, it's Berkshire's largest purchase since the $11.6 billion Alleghany deal back in 2022, a reminder of how Buffett's empire keeps evolving even as he prepares to hand the reins to Greg Abel.
Yet, the sale strips Occidental of some earnings diversity, making it more vulnerable to oil market whims. Berkshire gains a high-barrier operation that's been a quiet profit machine for years. As these corporate giants realign, one wonders how this fits into broader shifts in America's energy landscape.