Why Warren Buffett's Berkshire Hathaway may be placing another bet in petrochemicals

By Claudia Assis

Occidental would sell chemicals business for about $10 billion, WSJ reports

Warren Buffett's Berkshire Hathaway would spend about $10 billion to buy Occidental's chemicals business.

Warren Buffett's Berkshire Hathaway Inc. is the suitor for Occidental Petroleum Corp.'s petrochemicals business, according to a Wall Street Journal report late Tuesday.

Berkshire (BRK.A) (BRK.B) would buy OxyChem, as the business is known, for about $10 billion in a deal that could materialize in days, the report said, citing people familiar with the matter.

The deal would be Berkshire's largest since 2022, when it bought a reinsurance company for nearly $12 billion. It also would be the second time Berkshire placed a bet on petrochemicals: It bought specialty-chemicals maker Lubrizol Corp. in 2011, in a deal valued at almost $10 billion at the time.

Occidental shares gained 1.3% after hours Tuesday, while Berkshire's Class B shares declined fractionally.

The Financial Times reported Sunday that Occidental was in talks to sell the business for $10 billion, but did not name the buyer.

Berkshire already is Occidental's (OXY) top shareholder, with a stake of about 28% valued at nearly $13 billion, according to FactSet. OxyChem accounted for about 18% of Occidental's 2024 sales, or $4.92 billion out of total sales of $26.73 billion.

Occidental's oil and gas business brings the lion's share of sales, or about $22 billion last year. Analysts polled by FactSet estimate $4.90 billion in sales for the petrochemicals division this year, out of $26.74 billion total for the year.

For Occidental, the appeal of a sale is easier to see. A $10 billion deal would "come as surprise" to markets, as investors expected Occidental to hold onto the assets, analysts at TPH & Co said in note.

If it materializes, a transaction at that price tag "would be helpful in taking down leverage and would be above our carrying value of [about $8.3 billion]," the analysts said.

"Additionally, at least in 2025, the asset will not generate significant [free cash flow]" as Occidental has already lowered its outlook for pre-tax income to between $800 million and $900 million while maintaining relatively high spending, the analysts said.

Berkshire last month unveiled new positions in UnitedHealthcare Group Inc. (UNH) and homebuilder D. R. Horton Inc. (DHI), and went deeper into other homebuilding and home-related companies.

Occidental shares have lost 4.4% so far this year, contrasting with gains of about 14% for the S&P 500 index SPX.

-Claudia Assis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-30-25 2048ET