Buffett will spend $10 billion on the chemicals business. This is his biggest deal in three years

Warren Buffett's investment company Berkshire Hathaway has agreed to buy the petrochemical business of oil company Occidental Petroleum. The amount will be $9.7 billion in cash.

The parties expect to close the deal in the fourth quarter of 2025. It will require regulatory approvals and the fulfillment of a number of other conditions, according to the companies.

"Berkshire is acquiring a robust portfolio of operating assets backed by an experienced team," Berkshire's vice chairman of non-insurance operations Greg Abel said, he was quoted as saying in a company statement. Abel will succeed Warren Buffett as Berkshire's CEO on January 1, 2026.

"This transaction strengthens our financial position and unlocks the significant resource potential we have been building up in the oil and gas business over the past decade," said Occidental Petroleum President and CEO Vicki Hollab.

Occidental Petroleum shares were up more than 1% in the Oct. 2 premarket, while Berkshire Hathaway's Class B securities were down 0.3%.

The purchase agreement will be the largest for Berkshire since the $11.6 billion deal with insurance company Alleghany in 2022, CNBC noted. In addition, Berkshire concluded the deal by accumulating a record amount of free funds - about $344 billion, the channel added.

According to Barron's, expressed before the deal was officially announced, Berkshire is acquiring an attractive business at a reasonable-looking price. At the same time, Roth analyst Leo Mariani believes that the price "doesn't look good" when considering the earnings growth potential of OxyChem's chemicals business. The $10 billion deal "will come as a surprise to the market" as investors had expected the company to keep those assets, analysts at TPH & Co said in a note cited by MarketWatch.

Morningstar wrote even before the deal was officially announced that OxyChem's expected $10 billion purchase price looks slightly inflated relative to this year's projected pre-tax earnings ($850 million), but is more justified when compared to 2023 ($1.5 billion) and 2024 ($1.1 billion) results.

Occidental continues to struggle with a high debt load, which stood at $22 billion at the end of the second quarter of June, and Berkshire may have tried to take advantage of that, Morningstar believes. Occidental's debts are a legacy of its $55 billion purchase of oil and gas company Anadarko Petroleum in 2019, when the company beat U.S. second-largest oil and gas corporation Chevron in the battle for Texas' richest shale oil fields, Reuters writes, and it also acquired privately held U.S. shale oil producer CrownRock for $12 billion in 2023.

OxyChem is a global producer of bulk chemicals used in water treatment, pharmaceuticals, healthcare, and commercial and residential construction. This is the second time Berkshire has made a bet on petrochemicals: in 2011, the company bought specialty chemicals maker Lubrizol for nearly $10 billion, MarketWatch noted.

Berkshire is already Occidental's largest shareholder, owning about 28% of the company worth nearly $13 billion, according to FactSet data cited by MarketWacth. The OxyChem unit accounted for about 18% of Occidental's revenue in 2024 - $4.92 billion of the total $26.73 billion. In the first two quarters of this year, OxyChem brought in total revenue of $2.42 billion, Reuters writes.

Last month, Berkshire disclosed new positions in UnitedHealthcare Group Inc. and housing developer D.R. Horton Inc. and increased investments in other construction and housing-related companies, the publication said.

This article was AI-translated and verified by a human editor