Berkshire Hathaway has announced its acquisition of Occidental Petroleum’s chemical subsidiary, OxyChem, for $9.7 billion in an all-cash transaction. This move marks a significant milestone for Warren Buffett’s investment conglomerate. It is the largest acquisition since the company purchased insurance firm Allegheny Corporation for $11.6 billion in 2022.
Details of the Acquisition
Berkshire currently holds a 28.2% stake in Occidental and plans to use $6.5 billion from the sale proceeds to reduce Occidental’s debt to below $15 billion. This strategic financial maneuver comes at a time when Occidental has been facing challenges in its chemical segment. There is an ongoing market surplus that has led the company to lower its full-year forecast for OxyChem‘s pre-tax income by approximately 15%, bringing the expected range to $800 million to $900 million.
OxyChem is known for producing essential chemicals such as chlorine and sodium hydroxide, which are vital for industries like water treatment and healthcare. The acquisition strengthens Berkshire’s portfolio and enhances its foothold in the chemical industry.
Leadership Transition at Berkshire
Interestingly, Berkshire’s announcement regarding the acquisition did not mention Warren Buffett. This omission signals a transition of leadership to Greg Abel, who is set to succeed Buffett as CEO. Abel, currently serving as Berkshire’s vice chair, will take on greater responsibilities. Buffett, who has been at the helm since 1970, continues to influence the company’s strategic decisions as chairman. Buffett remains a prominent figure in the investment world, with a personal fortune estimated at $148.5 billion, making him the 10th-wealthiest person globally.
Berkshire’s Investment Strategy
Berkshire Hathaway has a long-standing relationship with Occidental. Initially, they supported its acquisition of Anadarko Petroleum with a $10 billion investment in 2019. In 2022, Berkshire received regulatory approval to increase its stake in Occidental to as much as 50%. Despite building equity in the firm, Buffett previously indicated that Berkshire would not pursue a controlling stake. He emphasized the company’s satisfaction with its current shares.
Occidental has been actively working to reduce its debt following its own acquisition of CrownRock for $10.8 billion. The company plans to sell around $4 billion in assets to further strengthen its financial position.
Berkshire Hathaway’s acquisition of OxyChem represents a strategic expansion into the chemical sector while also addressing Occidental’s financial challenges. As Buffett prepares for a leadership transition, the investment community will be closely watching how Berkshire continues to navigate its diverse portfolio and capitalize on future opportunities.
