OMAHA, Neb. (AP) — Warren Buffett announced his biggest deal in years Thursday with Berkshire Hathaway's $9.7 billion acquisition of Occidental Petroleum's chemical division.
The deal for OxyChem could be Buffett’s last big deal before he hands over the CEO title to Vice Chairman Greg Abel in January. Buffett plans to remain chairman at Berkshire and will continue to be involved in deciding how to spend the conglomerate’s more than $344 billion cash.
Berkshire’s cash pile has been steadily growing for years because Buffett has been unable to find any major acquisitions at attractive prices since completing the $11.6 billion acquisition of Alleghany Insurance in 2022. Prices for big acquisitions have been driven higher in recent years by the entry of more hedge funds into the market.
OxyChem makes things like chlorine for water treatment, vinyl chloride for plastics and calcium chloride that’s used to treat icy roads along with an assortment of other chemicals. It will fit nicely within Berkshire alongside Lubrizol, which Buffett bought in 2011 for $9 billion. But Berkshire generally doesn’t consolidate its subsidiaries, so OxyChem will likely continue operating independently.
OxyChem generated $213 million in pretax earnings for Occidental in the second quarter, though that is down from last year when it generated nearly $300 million for the company. This year, Occidental has been selling off some of its assets in the Permian Basin to generate $950 million to pay down debt. Since it completed the CrownRock acquisition in December 2023, Occidental has sold off roughly $4 billion worth of assets to help it pay down $7.5 billion in debt. This OxyChem deal will accelerate that.
Occidental expects to use $6.5 billion of proceeds from the Berkshire deal to lower debt and achieve the target of principal debt below $15 billion set following the announcement of its CrownRock acquisition.
Berkshire held more than 28% of Occidental’s stock and had warrants to buy another 83,911,942.38 shares in the major oil and gas producer for $59.586 per share before this deal. And Berkshire held about $8.5 billion worth of preferred Occidental shares that it picked up in 2019 when it helped finance the oil producer’s purchase of Anadarko that Occidental has been paying 8% dividends on every year.
Buffett had previously told Berkshire investors that he wouldn’t sell off the Occidental stake and he has been periodically buying more shares, but he also told shareholders in 2023 that he had no plans to buy all of Occidental.
Berkshire owns an eclectic assortment of dozens of companies, including Geico and several other insurers, BNSF railroad, a portfolio of major utilities and some well-known brands like Dairy Queen and See’s Candy. Buffett has built up the conglomerate over the past 60 years. In addition to owning companies outright, Berkshire holds stocks worth more than $250 billion, including large stakes in Apple, Coca-Cola, Bank of America and American Express.
The OxyChem deal is expected to close in the fourth quarter of this year.
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AP Business Writer Michelle Chapman contributed to this report.