Warren Buffett is moving on to Berkshire Hathaway’s biggest deal since 2022. As Cryptopolitan previously reported, Berkshire has struck an agreement to buy Occidental Petroleum’s chemical unit OxyChem for exactly $9.7 billion in cash.
This would be the legendary investor’s latest high‑stakes transaction as he nears the end of his run as CEO. Occidental is weighed down by billions in debt and chose to sell at a moment when chemical markets are at the bottom of their cycle.
Analysts at JPMorgan wrote, “One of the key tradeoffs was timing, as OXY is selling OxyChem at below mid‑cycle cyclical conditions for chemicals.” The deal shows Warren picking a time when a seller’s position is weak but the assets are still productive.
The purchase also leaves one of the biggest issues behind. Occidental is keeping OxyChem’s environmental liabilities instead of transferring them to Berkshire. The company disclosed in its latest filing that the liabilities total $1.9 billion. Mizuho analysts wrote, “OXY is retaining ~$1.9 billion of environmental remediation liabilities (as of YE24), which is a risk to future cash flows if the actual cost of remediation exceeds the current assessed value.”
This means Warren’s offer buys the assets without assuming the costly cleanup risk. At the same time, Occidental is also giving up a future cash flow windfall tied to OxyChem’s Battleground plant expansion, set for 2026. JPMorgan estimated the project could have boosted Occidental’s cash flow by $460 million annually from that year. After factoring in about $1.7 billion in tax leakage, the after‑tax value of the sale falls closer to $8 billion, the bank said.
Warren builds on a long and expensive history with Occidental
The market reaction to the deal was immediate, with Occidental’s stock tumbling by more than 7% on the day the purchase was announced, according to data from CNBC.
But the $10 billion investment is actually an addition to a long financial relationship between Warren and Occidental. Allow us to explain.
So in 2019, the Oracle of Omaha stepped in with a $10 billion commitment to help finance Occidental’s takeover of Anadarko Petroleum, and in exchange, he received preferred shares and warrants to buy more common stock.
By early 2022, Warren was also buying Occidental common stock directly in the open market, making Berkshire Hathaway Occidental’s largest shareholder, with a 28.2% stake in the energy giant.
That stake continues to pay. Occidental currently pays an 8% dividend on Berkshire’s preferred stake and a 2.1% dividend yield on its common stock at current prices. This gives Warren a regular income even before the OxyChem deal closes.
Occidental CEO Vicki Hollub said the company intends to redeem Berkshire’s preferred stock in 2029 as it builds cash reserves. That plan would change the relationship yet again, moving Berkshire from preferred holder to a giant common shareholder with a key position in one of America’s largest energy firms.
Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.
Source: https://www.cryptopolitan.com/warren-buffett-tricky-historic-deal-oxychem/