Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) announced Thursday it reached a deal to buy Occidental Petroleum’s (NYSE:OXY) petrochemical unit, OxyChem, for $9.7 billion in cash.
Shares of Occidental rose 1.7% to $48.54 in premarket trading.
Berkshire is already a major investor in Occidental, holding a 28.2% stake as of the end of June. This deal would mark Berkshire’s largest since 2022, when it paid $11.6 billion for insurer Alleghany.
Read also: Why Buffett Is Splurging $10 Billion On OxyChem, Which Has Just $5 Billion In Revenue
OxyChem produces critical chemicals such as chlorine, caustic soda, and PVC, used in water treatment, pharmaceuticals, and construction. These products are consistently in demand, providing the unit with predictable, recession-resistant revenue.
Debt Reduction Would Help Restart Stock Buyback
Occidental's CEO, Vicki Hollub, told CNBC's morning news program "Squawk Box" that the debt reduction resulting from the deal will enable the company to restart buying back stock.
OxyChem manufactures water treatment, healthcare, and other commercial chemicals.
Occidental said it plans to use $6.5 billion of the transaction proceeds to reduce its debt. The deal is expected to close in the fourth quarter of this year.
"The problem has been getting our debt down faster, so this resolves the one outstanding issue that I think will now unlock our stock and allow shareholders to feel more comfortable, hopefully, to add to their positions and others to come in," Hollub told CNBC. "So now we're going to be able to start our sharing purchase program again…"
"We look forward to welcoming OxyChem as an operating subsidiary within Berkshire," said Greg Abel, Vice Chairman of Non-Insurance Operations at Berkshire. Abel is set to replace Buffett as CEO of Berkshire in 2026.
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