Quick overview

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Berkshire Hathaway, owned by Warren Buffett, agreed to acquire Occidental Petroleum Corp.’s petrochemical division for approximately $9.7 billion in cash. The deal is the latest sign that Buffett appears to be returning to the market after years of avoiding large takeovers and gradually selling major holdings.

The deal is expected to close in the fourth quarter.  Occidental’s shares rose 1.4%, while Berkshire’s Class B stock declined 0.3%.

Buffett held nearly a record $344 billion in cash.
After purchasing rival CrownRock LP for $10.08 billion, Occidental, in which Berkshire owns about 27%, has announced nearly $4 billion in asset sales since early last year as part of its debt reduction efforts. The company stated its goal to lower its principal debt below $15 billion, using $6.55 billion of the proceeds from the sale of OxyChem.

OxyChem produces basic chemicals like sodium hydroxide and chlorine. Now that the prime sites are drilled, oil producers are working to boost efficiency to offset slowing output growth in the Permian Basin of West Texas and New Mexico, the largest US shale basin. This is when the proposed sale to Berkshire takes place.

Occidental is closing a significant chapter in its history. The company entered the chemicals industry decades ago, but in recent years, its annual sales in that division have declined. In August, Occidental reduced its full-year forecast for OxyChem’s pre-tax income by approximately 15%, to between $800 million and $900 million.

The company’s foray into the chemicals industry started decades ago, but its yearly sales in that segment have decreased. In August, Occidental lowered its full-year estimate for OxyChem’s pre-tax income by roughly 15%, to between $800 million and $900 million.