Berkshire Hathaway Eyes Occidental Petroleum's OxyChem in Potential $10 Billion Deal

Berkshire Hathaway Looks to Expand Footprint in Petrochemicals

Berkshire Hathaway Inc., led by legendary investor Warren Buffett, is in talks to acquire Occidental Petroleum Corp.'s petrochemical unit, OxyChem, according to a report late Tuesday by The Wall Street Journal. The potential deal is valued at approximately $10 billion and could be finalized within days.

If completed, this would be Berkshire's largest transaction since its 2022 acquisition of Alleghany Corp., a reinsurance company, for nearly $12 billion. It also marks a return to the petrochemicals space, following its 2011 acquisition of specialty chemicals manufacturer Lubrizol Corp., a deal valued at close to $10 billion at the time.

The news prompted a modest increase in Occidental Petroleum's stock in after-hours trading on Tuesday, while Berkshire Hathaway's Class B shares saw a slight dip.

Occidental Petroleum Aims to Reduce Debt

Berkshire Hathaway's interest in OxyChem comes as Occidental Petroleum seeks to reduce its debt. The Financial Times previously reported that Occidental was in talks to sell the unit for $10 billion, without disclosing the buyer's identity.

Berkshire Hathaway already holds a significant stake in Occidental Petroleum, owning approximately 28% of the company, with a market value of nearly $13 billion, according to FactSet data. In 2024, OxyChem accounted for approximately 18% of Occidental's total sales, contributing $4.92 billion out of $26.73 billion in total sales.

Occidental Petroleum's oil and gas business remains its primary revenue driver, generating approximately $22 billion in revenue last year. Analysts surveyed by FactSet project the company's total sales to reach $26.74 billion this year, with the petrochemicals division expected to generate $4.9 billion in sales.

Analyzing the Potential Deal

Analysts view the potential deal as attractive for Occidental Petroleum. TPH & Co analysts stated in a report that the $10 billion transaction would be a "surprise to the market," as investors had originally anticipated Occidental to retain these assets.

The analysts added that the deal, if consummated, "would help reduce the company's leverage and would be priced above its roughly $8.3 billion asset book value." They also noted that "the asset will not generate significant free cash flow, at least in 2025." Occidental has already lowered its pre-tax profit guidance to between $800 million and $900 million while maintaining high spending levels.

Occidental's stock is down 4.4% year-to-date, driven by declining oil prices and concerns about the company's debt burden. In contrast, the S&P 500 index is up approximately 14% over the same period.

Last month, Berkshire Hathaway also disclosed new stakes in UnitedHealthcare Group Inc. and homebuilder D. R. Horton Inc., and further increased its holdings in other homebuilding and related companies.