Warren Buffett-owned Berkshire Hathaway is set to acquire Occidental Petroleum’s chemical division, OxyChem, for $9.7 billion, marking possibly the last major deal under the billionaire investor who owns the firm, set to retire by year-end.Notably, Buffett’s name was absent from Thursday’s announcement materials, as reported by Associated Press, suggesting a transition of leadership to Vice Chair Greg Abel, who will become CEO in January.Although Buffett will retain his position as chairman at Berkshire and continue to influence decisions regarding the company’s substantial cash reserves exceeding $344 billion.The conglomerate’s cash has accumulated as Buffett struggled to identify attractively priced major acquisitions since purchasing Alleghany Insurance for $11.6 billion in 2022. Increased competition from hedge funds has driven acquisition prices higher.OxyChem produces essential chemicals including chlorine for water treatment, vinyl chloride for plastics and calcium chloride for road de-icing. The business will complement Berkshire’s existing chemical subsidiary, Lubrizol, acquired in 2011 for $9 billion.“Berkshire is acquiring a robust portfolio of operating assets, supported by an accomplished team,” Abel said in a prepared statement. “We look forward to welcoming OxyChem as an operating subsidiary within Berkshire,” he further said as quoted by AP.OxyChem’s pretax earnings fell to $213 million in the second quarter, compared to nearly $300 million previously. Occidental has been divesting Permian Basin assets, generating $950 million for debt reduction. Following the December 2023 CrownRock acquisition, Occidental has sold approximately $4 billion in assets to address $7.5 billion in debt.Occidental plans to utilise $6.5 billion from the Berkshire transaction to reduce debt below their $15 billion target, established after the CrownRock acquisition.Prior to this deal, Berkshire owned over 28% of Occidental’s stock, with warrants for an additional 83,911,942.38 shares at $59.586 each. Additionally, Berkshire held $8.5 billion in preferred Occidental shares from 2019, earning 8% annual dividends.While Buffett previously committed to maintaining Occidental stakes and continued purchasing shares, he informed shareholders in 2023 that complete acquisition wasn’t planned.Berkshire’s diverse portfolio includes insurance companies like Geico, BNSF railway, utilities, and renowned brands such as Dairy Queen and See’s Candy, built over 60 years. The company also maintains stock holdings exceeding $250 billion, including significant investments in Apple, Coca-Cola, Bank of America and American Express.The OxyChem transaction is scheduled to conclude in the fourth quarter of this year.
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