Occidental Shares Climb on $9.7B OxyChem Sale to Berkshire Hathaway
Warren Buffett's firm deepens its investment in the energy giant with an all-cash deal for its chemical division.
Shares of Occidental Petroleum (OXY) jumped 2.1% in pre-market trading after it was announced that Berkshire Hathaway has agreed to acquire its chemical division, OxyChem, for $9.7 billion in an all-cash transaction. The deal deepens the long-standing financial relationship between the two companies and marks another significant bet by Warren Buffett on the energy sector.
This acquisition is the latest chapter in a partnership that began in 2019 when to help Occidental fund its purchase of Anadarko Petroleum. Since then, Berkshire has become Occidental's largest shareholder, holding a nearly 29% stake in the company's common stock as of June 2024. Despite his significant holding, Buffett has stated that he has no intention of acquiring a controlling stake in Occidental.
The acquisition of OxyChem, which specializes in producing chemicals for a wide range of industries including pharmaceuticals and water treatment, is expected to close in the fourth quarter of 2025, pending regulatory approval. Occidental has announced that it will use , a move that will likely be welcomed by investors.
For Berkshire Hathaway, the deal is a classic Buffett move. It aligns with his strategy of acquiring cyclical businesses with strong fundamentals when they are out of favor. OxyChem's business is expected to complement Berkshire's existing specialty chemicals producer, Lubrizol. This acquisition is Berkshire's largest since 2022 and will likely be funded, at least in part, by converting its existing preferred stock holdings in Occidental.
This deal further solidifies the ties between Buffett and Occidental CEO Vicki Hollub, and it provides Occidental with a significant cash infusion to strengthen its balance sheet. For Berkshire Hathaway, it's an opportunity to acquire a cash-generative business at a potentially attractive price. The market's positive reaction suggests that investors view this deal as a win-win for both companies. to see how this strategic move plays out for both Occidental and Berkshire Hathaway in the long run.