Warren Buffett’s Berkshire Hathaway introduced Thursday it reached a deal to purchase Occidental Petroleum’s petrochemical unit, OxyChem, for $9.7 billion in money.
The deal marks Berkshire’s largest since 2022, when it paid $11.6 billion for insurer Alleghany. It additionally comes at a time during which the conglomerate is sitting on $344 billion in money, close to a report for the corporate.
Shares of Occidental fell greater than 7% on Thursday following the announcement.
Berkshire is already a significant investor in Occidental, holding a 28.2% stake as of the top of June. Buffett — who’s 95 and stepping down as CEO on the finish of the yr — has mentioned he would not take full management of the Houston-based oil firm.
OxyChem manufactures water remedy, well being care and different industrial chemical substances. Occidental mentioned it is going to use $6.5 billion of the proceeds to pay down debt.
Occidental CEO Vicki Hollub mentioned the debt discount ensuing from the deal will allow her firm to restart shopping for again inventory.
“The issue has been getting our debt down quicker, so this resolves the one excellent concern that I believe will now unlock our inventory and permit shareholders to really feel extra comfy, hopefully, so as to add to their positions and others to come back in,” Hollub mentioned Thursday on CNBC’s “Squawk Field.” “So now we’re going to have the ability to begin our sharing buy program once more. … That is the final step that we wanted in our main transformation that we began 10 years in the past.”
The final time Berkshire did a deal within the chemical area was in 2011, shopping for Lubrizol for the same $10 billion determine.
“We sit up for welcoming OxyChem as an working subsidiary inside Berkshire,” mentioned Greg Abel, vice chairman of non-insurance operations at Berkshire, in a press launch.
Abel, who will succeed Buffett as CEO of Berkshire in 2026, added that Hollub is exhibiting her “dedication to Occidental’s long-term monetary stability, as demonstrated by their plan to make use of proceeds to strengthen the corporate’s steadiness sheet.”
Each corporations anticipate the deal to shut within the fourth quarter. The Wall Road Journal first reported on the transaction earlier this week.
Buffett first obtained concerned with Occidental in 2019 when he helped bankroll Occidental’s buy of Anadarko Petroleum with a $10 billion dedication. He acquired most popular shares and warrants to purchase widespread inventory in return.
Hollub mentioned as Occidental grows its money place, it is going to begin redeeming Berkshire’s most popular inventory in 2029. Occidental at the moment pays a 8% dividend on Berkshire’s preferreds.
