Buffett's Berkshire to Acquire Occidental's Petrochemical Business for $10 Billion
Warren Buffett, the renowned investor and CEO of Berkshire Hathaway, is set to acquire Occidental Petroleum Corp's petrochemical business, OxyChem, for around $10 billion. This deal, expected to close in the second half of 2023, marks Buffett's second significant bet on the chemicals industry.
Buffett's interest in Occidental, also known as OXY, began in 2019 when its CEO Vicki Hollub visited him to discuss a potential deal. This led to Berkshire purchasing $10 billion of preferred shares in the company, giving Buffett around 28% of its shares. Initially attracted by OXY's earnings conference call transcript, Buffett saw potential in the company's petrochemical business, OxyChem.
OxyChem, which generated nearly $5 billion in sales in the 12 months ended in June 2023, is expected to generate pretax income of $800 million to $900 million in 2023. This acquisition would be Berkshire's biggest deal since its acquisition of Alleghany Corp. in 2022 for $13.7 billion. It also follows Buffett's earlier acquisition of Lubrizol for nearly $10 billion in 2011, indicating his continued interest in the chemicals sector.
Meanwhile, the U.S. oil industry faces challenges with a 15% fall in prices in 2023. Occidental, however, has been diversifying its business. It recently announced the sale of its gas pipeline and other infrastructure to Enterprise Products Partners. This deal with Berkshire Hathaway further signals its strategic shift.
The acquisition of OxyChem by Berkshire Hathaway is expected to close in the second half of 2023, pending regulatory approvals. This deal reflects Warren Buffett's continued confidence in the chemicals industry and Occidental's potential. Despite stepping down as Berkshire CEO at the end of 2025, Buffett's investment decisions continue to shape the company's portfolio.
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