Berkshire Hathaway Pursues Acquisition of Occidental Petroleum's OxyChem Unit

Summary of Key Developments

Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) is reportedly in advanced negotiations to acquire Occidental Petroleum Corporation's (NYSE: OXY) OxyChem unit. This potential transaction, valued at approximately $10 billion, would represent Berkshire Hathaway's largest acquisition since 2022, signaling a significant strategic move for both conglomerates.

The Proposed Transaction in Detail

Berkshire Hathaway, under the continued influence of Warren Buffett, is nearing a deal to integrate OxyChem, the petrochemical division of Occidental Petroleum, into its extensive portfolio. Sources suggest the finalization of this agreement could occur within days. This acquisition would follow Berkshire's $11.6 billion purchase of insurer Alleghany in 2022.

OxyChem is a substantial entity within the chemicals sector, having generated approximately $5 billion in revenue over the past year. Projections indicate the unit is expected to deliver $800–$900 million in pretax income this year. Its production encompasses vital materials such as chlorine, PVC resin, and various vinyl products, which are crucial for applications in water treatment, medical supplies, and construction industries.

Market reactions saw Berkshire Hathaway Inc. Class B shares ($BRK-B) close at $502.74 on September 30, 2025, recording a modest daily gain of 0.70%. Conversely, Occidental Petroleum's stock experienced a decline of 1.8% following the reports of the potential divestiture.

Strategic Rationale and Market Implications

For Berkshire Hathaway, the acquisition of OxyChem aligns with its long-standing investment philosophy of acquiring businesses with predictable earnings and resilient market positions. The inclusion of OxyChem would significantly expand Berkshire's industrial portfolio, diversifying its revenue streams. CEO Greg Abel, recognized for his extensive background in the energy sector, is strategically positioned to oversee the integration of this asset. Berkshire's formidable cash reserves, reported at $344 billion as of the end of June, provide ample financial strength to fund this acquisition without undue strain. Notably, Berkshire already holds a substantial 28.2% stake in Occidental Petroleum, valued at over $11 billion.

For Occidental Petroleum, the divestiture of OxyChem is a critical component of its strategy to aggressively reduce its significant debt burden. This debt largely originated from its $55 billion acquisition of Anadarko in 2019. Occidental has already made substantial progress, cutting its debt from nearly $49 billion to approximately $24 billion. The anticipated $10 billion+ in proceeds from the OxyChem sale are earmarked for further debt reduction, addressing remaining 2025 debt maturities, and funding strategic investments in carbon capture technology and renewable energy initiatives. While OxyChem historically offered revenue diversification and acted as a buffer against volatile oil markets by contributing roughly 19% of total sales, its sale will undeniably increase Occidental's exposure and reliance on fluctuating oil prices. Nevertheless, this move is expected to enable Occidental to sharpen its focus on core oil and gas operations, particularly within the Permian Basin, and potentially enhance shareholder returns through increased dividends and share buybacks. Since July 2024, Occidental has repaid $7.5 billion in debt, resulting in an estimated $410 million in annual interest cost savings.

Broader Context and Future Outlook

The proposed transaction reflects a broader industry trend where major players in the energy and chemicals sectors are re-evaluating their asset portfolios to optimize financial structures and strategic focus. Occidental's proactive debt reduction strategy, evidenced by $950 million from Permian Basin and Rockies asset sales and an additional $580 million expected from Midland Basin gas gathering assets, underscores its commitment to deleveraging.

For Berkshire Hathaway, this acquisition highlights its ongoing capacity to deploy substantial capital into stable, cash-generating businesses, even as Warren Buffett prepares to transition from his CEO role at the close of 2025. Berkshire's year-to-date return as of September 30, 2025, stood at 10.91%, in comparison to the S&P 500's 13.72%. Over a five-year period, BRK-B has delivered a gain of 136.09%, outperforming the benchmark's 98.88%.

Market sentiment surrounding the deal is nuanced, ranging from mixed to positive. While Occidental's stock experienced a minor decline post-announcement, the prospect of significant debt reduction and potential enhancements to shareholder returns could foster a more favorable long-term view. For Berkshire, the acquisition is perceived as consistent with its strategic investment framework, offering predictable earnings and a stable asset.

The transaction may attract scrutiny from antitrust regulatory bodies, given the increased focus on mergers and acquisitions within the chemicals and energy sectors by agencies such as the Federal Trade Commission (FTC). However, the FTC has historically shown less inclination to challenge horizontal mergers involving energy exploration and production companies.

Moving forward, investors will closely monitor the successful finalization of the deal, Occidental's subsequent progress in debt reduction, and any announcements regarding capital allocation strategies, including dividends and share buybacks. For Berkshire, the successful integration of OxyChem into its industrial holdings and its anticipated contribution to earnings will be key performance indicators.