KEY TAKEAWAYS
- Berkshire Hathaway is reportedly close to finalizing a $10 billion deal to buy OxyChem, the petrochemical division of Occidental Petroleum.
- The deal would be the conglomerate’s biggest since its $11.6 billion purchase in 2022 of insurer Alleghany.
Berkshire Hathaway (BRK.A, BRK.B) is reportedly close to a $10 billion deal to buy the petrochemical division of Occidental Petroleum (OXY), in what would be the largest deal by Warren Buffett’s conglomerate since 2022.
Buffett, according to the Financial Times and The Wall Street Journal, is already the largest shareholder in Houston-based Occidental. Berkshire’s 2022 purchase of insurer Alleghany for $11.6 billion was the last major deal for the conglomerate, which has been growing its cash pile lately by unwinding shares in companies like Apple (AAPL) and Bank of America (BAC), rather than making big-ticket acquisitions.
According to the reports, citing people familiar with the matter, talks for the conglomerate to buy OxyChem could be completed within days. The OxyChem deal would be Buffett’s second big bet on chemicals after Berkshire Hathaway’s acquisition of Lubrizol in 2011, the reports said.
Why This Is Significant
With the “Oracle of Omaha” set to step down as CEO at the end of the year, investors are closely watching Warren Buffett’s moves at the helm of Berkshire Hathaway to gauge its strategy. The company has a record $344 billion cash pile and has held off on large acquisitions in recent years, so this potential deal is of special interest to investors.
Berkshire had a record cash-and-equivalents pile of $344 billion at the end of June, while debt-laden Occidental has been selling noncore assets to raise cash. Lofty valuations have made it difficult for Buffett, known for being a value investor, to deploy that cash, including buying back its own stock.
The 95-year-old Buffett, known as the “Oracle of Omaha,” is planning to retire from his role as CEO at the end of the year, with Greg Abel set to take over.
Shares of Occidental Petroleum, which entered Wednesday down 4% this year, were little changed in recent trading. Berkshire Hathaway’s shares were about 1% lower but have gained nearly 10% since the start of the year.
Occidental and Berkshire Hathaway did not immediately respond to Investopedia‘s requests for comment.
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