Berkshire Hathaway's $9.7bn Acquisition of OxyChem
- amansp2006
- 2 days ago
- 5 min read
Updated: 1 day ago
By Mateo Rafael Roman Sy, Nathaline Marielle Lukito, Nguyen Thi Hong Linh, Parth Talwar, and Jeongmin Oh (The University of Hong Kong), Edoardo Roveda, Alesha Jaswal, Mikhail Sinev, and Cooper Wu (University College London)
Photo: Crystal Kwok
Overview of the deal
Acquirer: Berkshire Hathaway
Target:Â OxyChem
Implied Equity Value: $9.7 Billion
Total Transaction Size:Â $9.7 Billion
Closed date:Â October 2, 2025
Target advisor: Barclays (Financials), Cravath, Swaine & Moore LLP (Legal)
Acquirer advisor:Â Not Disclosed (Financial), Kirkland & Ellis LLP (Legal)
Berkshire Hathaway (BRK-A/BRK-B), on the 2nd of October, announced its $9.7 billion acquisition of 100% of Oxychem, a subsidiary of Occidental Petroleum that provides chemical products. Oxychem offers chemical products, specifically polyvinyl chloride, for various sectors that inextricably impact our daily life, including water pipelines, medical supplies, refrigerants, and the renewable energy industry.
The rationale behind Berkshire Hathaway’s acquisition of Oxychem was a surprise to Wall Street, yet it was tactically consistent with Warren Buffett’s philosophy of value investing. Warren Buffett is not known for investing in high-growth tech stocks, but rather for purchasing cheap equities with high intrinsic value that provide steady cash flow, supported by an impressive business model that creates an economic moat. Oxychem then falls within this category because its business operations implicate the most vitally important aspects of the US economy, such as utilities, healthcare, consumer products, and the future of renewable energy. Simultaneously, Oxychem was relatively inexpensive because Occidental Petroleum hunkered for cash to pay off the considerable amount of the company’s debt accumulated through radical M&A activities in previous years, showing Oxy's eagerness to sell that subsidiary fast. Therefore, Occidental Petroleum sold Oxychem to Berkshire Hathaway and used $6.5 billion to reduce its debt resulting from the acquisition of CrownRock. Warren Buffett seeks sound assets amid volatility, uncertainty, and risk, while Occidental Petroleum desperately needs cash, ultimately leading to Berkshire Hathaway’s acquisition of Occidental Petroleum.
"This transaction strengthens our financial position and catalyses a significant resource opportunity we’ve been building in our oil and gas business. OxyChem has grown into a well-run, safely operated business, and we are confident it will continue to thrive under Berkshire Hathaway’s ownership." – Vicki Hollub, Occidental Petroleum CEO
Company Details (Acquirer - Berkshire Hathaway)
Berkshire Hathaway Inc. is a holding company that owns subsidiaries in various industries, such as primary insurance, utilities and energy distribution, freight rail transportation, manufacturing, and services and retailing. These are the core businesses of Berkshire Hathaway, though Berkshire is also known for its significance in equity investing. Berkshire Hathaway’s CEO Warren Buffet is known for its focus on value investing while not longing for tech stocks. Berkshire Hathaway has recently been a seller of equities, signalling its cautious outlook for the financial market, accompanied by a massive increase in cash holdings.
Founded in 1839, headquartered in Massachusetts, United States of America
CEO:Â Warren Buffett
Number of employees: 396,500
Market Cap:Â $1.09 Trillion USD as of November 21, 2025
EV: $771.3bn
LTM Revenue:Â $371.4bn
LTM EBITDA:Â $73.4bn
LTM EV/Revenue:Â 2.08x
LTM EV/EBITDA:Â 10.45x
Recent Transactions: $14bn acquisitions of Pilot Flying J (2017 to 2024); $11.6bn acquisition of Alleghany Corporation (October, 2022); $9bn acquisition of Lubrizol Corporation (December, 2011)
Company Details (Target - OxyChem)
OxyChem, wholly owned subsidiary of Occidental Petroleum, is one of the leading chemical producers, specializing in basic chemicals, vinyls, petrochemicals, and performance materials. The company supplies essential materials for sectors including construction, water treatment, automotive, and pharmaceuticals across the United States, Canada, and Latin America. OxyChem received 47 awards from the American Chemistry Council (ACC) in 2024 for its outstanding environmental and safety performance. Prioritizing water quality and cleanliness, the company has consistently advanced its sustainability initiatives and programs in its production process.
Founded in 1920, headquartered in Dallas, Texas, United States
CEO: Vicki Hollub
Number of employees:Â 4,000+
Market Cap (Occidental Petroleum):Â $40.84bn (November 21, 2025)
EV (Occidental Petroleum): $69.84bn
LTM Revenue (Occidental Petroleum):Â $26.6bn
LTM EBITDA (Occidental Petroleum):Â $12.69bn
LTM EV/Revenue (Occidental Petroleum):Â 2.63x
LTM EV/EBITDA (Occidental Petroleum):Â 5.75x
Projections and Assumptions
Short-Term Consequences
The announcement of Berkshire Hathaway’s $9.7bn all-cash acquisition of OxyChem initially triggered a 7% drop in Occidental Petroleum’s (Oxy) share price, from about $47.72 to $44.23. The decline reflected investor concern over Oxy selling one of its most stable, cash-generating assets and the potential drag on future earnings. However, the $9.7bn inflow provides critical balance sheet relief, with $6.5bn allocated to reduce the heavy debt burden from Oxy’s 2019 Anadarko Petroleum acquisition. This liquidity injection boosts near-term financial stability, supporting faster deleveraging and an improved credit outlook.
For Berkshire, the deal increases its short-term exposure to energy-related cyclicality, particularly crude oil price volatility, as its portfolio becomes more concentrated in oil and gas-linked industries. However, by acquiring a downstream chemical business rather than direct upstream oil assets.
Berkshire also achieves a partial hedge within the energy value chain. The acquisition strengthens its operational influence in a sector already familiar through existing holdings such as Lubrizol, while delivering immediate value to consolidated earnings.
In the short term, the transaction reinforces market confidence in Berkshire’s ability to execute large-scale strategic acquisitions even in a slowing economic environment, reflecting Warren Buffett’s continued focus on capital deployment into real-economy, asset-backed businesses before Greg Abel’s succession.
Long-Term Upsides
Stable Cash Flow Generation: This acquisition provides Berkshire Hathaway with another reliable and predictable source of earnings from a mature, cash-generating chemicals business that produces essential industrial materials like PVC, chlorine, VCM, and caustic soda. The demand for these products is expected to remain steady in the long term, particularly in the construction, manufacturing, and water treatment sectors, thereby enhancing Berkshire’s long-term cash flow stability.
Enhanced Industrial Diversification: Acquiring OxyChem adds more depth to Berkshire’s already strong presence in the manufacturing and heavy industry. This acquisition, alongside other capital-intensive, long-life industrial assets owned by the company, such as Lubrizol and Precision Castparts, reinforces its strategy of owning businesses with durable and recession-resistant fundamentals.
Inflation-Resistant Asset: OxyChem becomes an effective inflation hedge within Berkshire’s portfolio, since chemical product prices are closely connected to its raw material and energy inputs. This pricing flexibility enables OxyChem to move in line with inflationary pressures rather than being eroded, allowing it to maintain healthy margins even during periods of rising prices.
Cyclical Upside & Structural Demand Tailwinds: This acquisition, made during a cyclical downturn, gives Berkshire a strategic advantage to buy OxyChem when valuations are suppressed, positioning the firm to capture upside when demand normalizes. Long-term trends, such as rising infrastructure investment, increased housing construction, and expanding demand for clean water solutions, have also underpinned the demand, ensuring it remains stable.Â
Risks and Uncertainties
Berkshire Hathaway’s acquisition of OxyChem, the chemical subsidiary of Occidental Petroleum, presents several risks and uncertainties despite its strategic rationale. The transaction is expected to close in the fourth quarter of 2025, subject to regulatory approvals and other customary closing conditions, which themselves introduce timing and approval risks. Any delay or disapproval from antitrust or environmental regulators could affect the deal’s completion and integration timeline. A key risk lies in cyclicality and commodity exposure. OxyChem’s profitability is highly sensitive to fluctuations in input prices like natural gas and ethylene, and to global demand for products such as PVC and caustic soda. A downturn in construction or industrial activity could compress margins and erode returns.
Environmental and regulatory risks are also significant. The chemicals sector operates under stringent environmental laws and faces potential liabilities for pollution, hazardous waste, and emissions. Evolving regulations or unexpected remediation costs could materially impact post-acquisition cash flows. Additionally, there are integration and strategic alignment risks. While Berkshire holds a substantial stake in Occidental Petroleum, managing a chemicals subsidiary may not align seamlessly with Berkshire’s core insurance, utility, and industrial operations. Ensuring operational autonomy while maintaining oversight will be critical. Finally, valuation and market sentiment risks persist. Given cyclical headwinds and heightened ESG scrutiny, the deal could challenge Berkshire’s value-oriented investment philosophy if OxyChem’s earnings underperform expectations in the short to medium term.