Berkshire Hathaway is negotiating to buy Occidental Petroleum’s chemical arm OxyChem for about $10 billion

Berkshire Hathaway is negotiating a deal to buy Occidental Petroleum’s petrochemical arm for about $10 billion, according to a report from The Wall Street Journal.

This would be the conglomerate’s largest purchase since its $11.6 billion acquisition of Alleghany in 2022, and the Journal said an agreement could be reached within days.

Occidental is primarily known for its oil and gas business and has a market value of about $46 billion. It already counts Berkshire Hathaway as its largest shareholder.

The unit at the center of the talks is OxyChem, which manufactures and sells chemicals used in chlorinating water, recycling batteries, and producing paper. This division generated almost $5 billion in sales in the 12 months ended in June.

If the transaction closes, it would be Warren Buffett’s second major step into chemicals after Berkshire Hathaway purchased Lubrizol for nearly $10 billion in 2011, including debt.

“Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned,” Warren wrote earlier this year.

Berkshire Hathaway expands chemical bets with Occidental talks

The Financial Times had reported on Sunday that Occidental was in discussions for a $10 billion sale of OxyChem without naming the buyer. The last time Berkshire Hathaway struck a major deal was in 2022, when it agreed to buy insurer Alleghany.

Warren first got involved with Occidental in 2019, when Chief Executive Vicki Hollub was trying to outbid Chevron for Anadarko Petroleum. In a meeting arranged by Bank of America Chief Brian Moynihan, Hollub went to Nebraska to meet Warren. His company then agreed to purchase $10 billion in preferred shares of Occidental to support its $38 billion offer.

Since then, Occidental’s financial position has fluctuated. The Anadarko deal left the company with heavy debt and drew criticism from activist investor Carl Icahn. Warren increased his stake as Icahn exited and ultimately built up ownership of about 28% of the company.

Recently, Occidental’s shares have been under pressure because of lower oil prices. To manage its balance sheet, the company has been selling off non-core assets. By August, it said it had repaid $7.5 billion of debt.

Berkshire Hathaway deploys record cash pile amid leadership changes

Meanwhile, Berkshire Hathaway has been holding a record $344 billion in cash and Treasury bills as of the end of June. Warren has repeatedly said the company prefers buying entire businesses, even though finding attractive opportunities has been difficult.

The potential OxyChem deal would allow Berkshire Hathaway to deploy part of its cash stockpile into a large operating asset rather than sit on cash-equivalent investments. Warren is preparing to retire as CEO at the end of the year and hand control to Greg Abel, though he will stay on as chairman.

If this transaction closes, it will underline Warren’s long involvement with Occidental and his willingness to expand his holdings beyond traditional energy investments.

The negotiations is also a nod to Occidental’s strategy of raising cash by selling assets while cutting debt, and Berkshire Hathaway’s ongoing search for businesses that match its size and resources.

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