Berkshire Hathaway to buy US firm Occidental’s OxyChem unit for $9.7bn

Berkshire Hathaway has agreed to buy Occidental Petroleum’s chemical business, OxyChem, for $9.7bn in cash.

In an October 2 announcement, the companies said that Occidental anticipates using $6.5bn of the proceeds from the transaction to reduce debt. This is expected to help Occidental achieve its target of principal debt below $15bn, which it set following its decision to acquire CrownRock in December 2023 in a $12bn deal.

The remaining after-tax proceeds of roughly $1.5bn from the sale to Berkshire Hathaway are expected to go to Occidental’s balance sheet, according to a company investor presentation released the same day.

OxyChem manufactures commodity chemicals that it describes as being “vital to quality of life” on a global basis. The announcement noted that these have applications in water treatment, pharmaceuticals, healthcare and commercial and residential development. An Occidental subsidiary will retain OxyChem’s legacy environmental liabilities, while Glenn Springs Holdings will continue to manage existing remedial projects for that subsidiary, the announcement added.

The acquisition is expected to close in the fourth quarter of this year.

In its investor presentation, Occidental noted that the deal would allow it to increase its focus on its oil and gas business. The company intends to accelerate development, targeting projects that maximise resource potential with existing assets and infrastructure while continuing to pursue cost efficiencies and advanced recovery techniques.

The sale represents a continuation of a close relationship between Occidental and Berkshire Hathaway. Indeed, the latter is Occidental’s largest shareholder, holding around 27% of its outstanding shares. This stake is valued at $11.9bn according to CNBC.

The OxyChem sale comes after Occidental has spent nearly $50bn on buying other companies over the past six years, with the Wall Street Journal noting that this was in part thanks to financing from Berkshire Hathaway. While this has helped Occidental to grow as an oil and gas producer, though, it has left it with billions of dollars in debt that the company is now seeking to pay down.