Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) has announced it will acquire Occidental Petroleum’s chemical business, OxyChem, in an all-cash transaction valued at $9.7 billion. The deal, expected to close in the fourth quarter of this year, marks Berkshire’s largest acquisition since its $11.6 billion purchase of Alleghany Insurance in 2022.
While Buffett’s name was notably absent from the official deal announcement, the move is widely seen as part of the strategic transition to Vice Chairman Greg Abel, who is set to succeed Buffett as CEO in January. Still, sources close to the matter suggest Buffett played an active role in negotiations, given his longstanding relationship with Occidental CEO Vicki Hollub and his well-known practice of overseeing acquisitions exceeding $1 billion. After stepping down as CEO, Buffett will remain as chairman and continue to influence how Berkshire deploys its massive cash reserves, which now exceed $344 billion.
Berkshire’s cash hoard has swelled in recent years as Buffett found few attractively priced acquisition targets. Intensified competition from hedge funds has driven up valuations for major deals, limiting opportunities that meet Berkshire’s disciplined criteria. While the OxyChem acquisition is substantial, it utilizes only about 3% of Berkshire’s cash and is unlikely to significantly impact its overall earnings. Market reaction was muted: Berkshire’s stock dipped slightly, while Occidental’s shares fell more than 7% following the announcement.
OxyChem, a leading producer of chlorine, vinyl chloride, and calcium chloride, is expected to create operational synergies with Lubrizol—a specialty chemicals company Berkshire acquired for $9 billion in 2011. Greg Abel emphasized in a statement that OxyChem will operate as an independent subsidiary, consistent with Berkshire’s decentralized management model.
Edward Jones analyst Jim Shanahan noted that having Abel lead this deal aligns with the leadership transition. However, investors are closely watching whether Abel—known for his hands-on management style—might encourage greater collaboration or integration among Berkshire’s subsidiaries, a potential departure from Buffett’s traditional hands-off approach.
For Occidental, the sale represents a critical step in its ongoing debt-reduction effort. Although OxyChem contributed $213 million in pre-tax earnings in the second quarter, Occidental plans to use $6.5 billion of the proceeds to pay down debt, accelerating progress toward its target of reducing principal debt below $15 billion. This follows the company’s $12 billion acquisition of CrownRock late last year, which significantly increased its debt load.
Berkshire already holds a 28% stake in Occidental, along with warrants to purchase additional shares and $8.5 billion in preferred stock paying 8% annual dividends. While Buffett has ruled out a full takeover of Occidental, this latest acquisition further strengthens the strategic and financial links between the two companies.
As Berkshire—a conglomerate spanning insurers, railroads, utilities, and consumer brands like Geico, BNSF, and Dairy Queen—navigates its first leadership change in six decades, the OxyChem deal reflects both continuity with Buffett’s philosophy of acquiring strong cash-generating businesses and a preview of how capital allocation may evolve under Abel’s tenure.
