Berkshire Hathaway, the sprawling conglomerate led by the legendary Warren Buffett, is reportedly on the cusp of unveiling its largest acquisition in years: a deal for Occidental Petroleum's Occidental Petroleum (Oxy) petrochemical unit, potentially valued at close to $10 billion. This move would mark a significant deployment of Berkshire's Berkshire Hathaway formidable cash pile and reshape a portion of its diverse portfolio.
Sources familiar with the matter suggest an announcement could come in the coming days, signaling a pivotal moment for both companies. For Occidental, the sale of its petrochemical division, known as OxyChem, represents a crucial step in its ongoing strategy to shed non-core assets and reduce the substantial debt load it incurred following its 2019 acquisition of Anadarko Petroleum for $55 billion. This divestment would allow Oxy to sharpen its focus on its core upstream oil and gas exploration and production operations, particularly in the Permian Basin.
Meanwhile, for Berkshire Hathaway, this acquisition would be a classic "elephant hunting" maneuver, addressing Buffett's long-stated desire to deploy capital into large, high-quality businesses. The conglomerate ended the first quarter of 2024 with a staggering ~$167 billion in cash and short-term investments, making substantial acquisitions a necessity to drive meaningful growth. OxyChem, a well-established player in the chemical industry, boasts a stable revenue stream and strong competitive advantages, aligning perfectly with Berkshire's preference for businesses with durable economic moats.
What's more, this potential deal isn't Berkshire's first foray into Occidental. Buffett famously provided preferred equity financing to Oxy during its contentious Anadarko bid, securing a lucrative 8% dividend and warrants. Berkshire has since accumulated a significant stake in Oxy's common stock, making it the largest shareholder with over 28% of the company. This existing relationship likely provided Berkshire with an intimate understanding of Oxy's assets, including its petrochemical division, making due diligence less arduous and potentially smoothing the path to a deal.
The petrochemical sector, though cyclical, tends to offer more predictable cash flows compared to the volatile upstream oil and gas industry. OxyChem produces essential chemicals like chlorine, caustic soda, and PVC, which are fundamental to a wide array of industrial and consumer products. This stability would be a welcome addition to Berkshire's energy portfolio, which already includes utilities like Berkshire Hathaway Energy and significant oil and gas pipeline infrastructure.
Crucially, an acquisition of this magnitude would underscore Berkshire's continued appetite for large, industrial assets that can generate consistent earnings over the long term, even as critics question the availability of such opportunities given Buffett's investment criteria. Should the deal materialize, it would mark a significant chapter for both Occidental's deleveraging efforts and Berkshire Hathaway's ongoing quest for profitable growth. All eyes will be on Omaha and Houston in the coming days for an official confirmation.
