Buffett’s Final Major Deal: Berkshire Buys Oxy Petrochemical Unit

The acquisition of Occidental Petroleum’s petrochemical division represents a carefully calculated transaction that serves multiple strategic purposes for both companies. Berkshire Hathaway’s approximately $10 billion purchase provides Occidental with crucial capital to reduce its debt burden and improve its balance sheet position. This financial engineering directly benefits Buffett, who already holds between 27% and 35% of Occidental’s common stock, plus significant preferred shares acquired during Occidental’s 2019-2020 acquisition of Anadarko Petroleum. The deal structure creates what analysts describe as a classic Buffett ‘buddy transaction’ – mutually beneficial arrangements that strengthen both parties while potentially increasing Berkshire’s overall share value.

Beyond the immediate financial benefits, the petrochemical division being acquired includes specialized products that are in high demand within the industry. This strategic element adds substantial value beyond mere financial engineering, providing Berkshire with assets that generate consistent revenue streams. The transaction demonstrates Buffett’s continued focus on acquiring businesses with durable competitive advantages and essential products, even as he prepares to step back from active leadership at Berkshire Hathaway.

Buffett’s relationship with Occidental Petroleum dates back to 2019-2020 when Berkshire provided crucial financing for Occidental’s acquisition of Anadarko Petroleum. That earlier deal netted Berkshire significant 8% preferred shares that have paid hundreds of millions in dividends since the transaction closed. Additionally, Buffett obtained warrants to purchase Occidental common stock at approximately $60 per share, though the stock currently trades around $44-45, representing a potential future opportunity if Occidental’s share price recovers.

The current petrochemical division acquisition continues this pattern of strategic partnership. By providing Occidental with $10 billion to reduce debt and improve its financial position, Buffett is effectively strengthening an investment he already owns substantially. This approach reflects his long-standing investment philosophy of supporting companies in which he has significant stakes, creating value through strategic capital allocation rather than speculative trading. The transaction also highlights Buffett’s confidence in Occidental’s management and long-term prospects, despite the current stock price being below his warrant exercise price.

The timing of this major acquisition coincides with Berkshire Hathaway’s carefully orchestrated leadership transition. The company recently modified its corporate documents to separate the CEO and chairman roles, allowing Greg Abel to assume the CEO position while Buffett remains as chairman. This structural change facilitates a smooth transition of operational responsibilities while maintaining Buffett’s oversight and strategic guidance during the handover period.

This petrochemical division purchase may represent Buffett’s final significant investment decision before reducing his active involvement in Berkshire’s day-to-day operations. The deal serves as a capstone to his career, demonstrating his signature investment approach one final time. By executing a transaction that benefits both Berkshire and Occidental, while acquiring valuable assets with specialized products, Buffett is leaving his successor with a strengthened portfolio and a clear example of the strategic thinking that has defined his legendary career.

The transaction also provides Greg Abel with a clear demonstration of Berkshire’s investment philosophy in action as he prepares to take the helm. The deal showcases how Berkshire can leverage its substantial capital reserves to create value through strategic partnerships and acquisitions, rather than through speculative or short-term oriented investments. This final major move by Buffett sets a strong foundation for Abel’s leadership while ensuring Berkshire’s investment approach remains consistent through the transition.