Berkshire Hathaway will buy OxyChem, the petrochemicals division of Occidental Petroleum, for $9.7 billion in the largest deal in three years by the investment platform associated with Warren Buffett.
The deal, anticipated yesterday by the Wall Street Journal, was announced by Berkshire itself without mentioning Buffett, in a blatant sign of the transition in the group’s leadership to Greg Abel, appointed in May by the ‘Oracle of Omaha’ himself to the role of CEO.
Activity
Houston-based Occidental is best known for its oil and gas activities. The company has a market capitalisation of about USD 46 billion and already counts Berkshire as a major shareholder. Occidental’s petrochemical division, OxyChem, produces and sells chemicals used in applications ranging from water chlorination to battery recycling and paper production. The unit generated nearly $5 billion in sales in the 12 months ended June.
The Bet
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The acquisition of OxyChem follows Buffett’s big bet in the chemicals sector by more than a decade: in 2011, Berkshire Hathaway had acquired specialty chemicals producer Lubrizol for nearly $10 billion, including debt. Occidental Petroleum was founded in 1920 in Los Angeles by a small group of investors. In 1957, Armand Hammer joined the company and bought a large share and became its president. It was he who turned a small regional company into an international giant, thanks to contracts in Libya, the Middle East and with the Soviet Union.
