Morningstar

Berkshire Hathaway: Buying OxyChem From Occidental Petroleum for $9.7 Billion in an All-Cash Deal

We expect to make a slight increase to our fair value estimate on Berkshire stock.

The Berkshire Hathaway Inc. is displayed on a smartphone screen.
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Securities in This Article
Berkshire Hathaway Inc Class A
(BRK.A)

Key Morningstar Metrics for Berkshire Hathaway

Berkshire Hathaway BRK.A has agreed to purchase Occidental Petroleum’s petrochemical business, OxyChem, for $9.7 billion in an all-cash deal.

Why it matters: Berkshire looks to be taking advantage of Occidental’s need to reduce its sizable debt load—which stood at $22 billion at the end of the June quarter—to acquire OxyChem at a discounted price.

  • Berkshire is buying OxyChem at near trough levels in the cycle. While the deal’s implied multiple of just over 8 times and 7 times expected EBITDA for 2025 and 2026, respectively, is in line with where peers are trading, the entire chemicals industry looks discounted to our analysts.
  • During the past couple of years, Occidental has paid down more than $7 billion of debt using its own free cash flow, as well as asset sales. Occidental expects to use $6.5 billion of the OxyChem proceeds to reduce its debt load further to $15 billion on a net debt basis.

The bottom line: While we had envisioned Berkshire swapping the preferred stock it held in Occidental as part of any transaction, which we had expected Occidental to ask for, we are encouraged by its move to pay all-cash for the OxyChem deal.

  • As part of its purchase of Anadarko, Occidental received $10 billion from Berkshire in exchange for 8% preferred stock, as well as warrants to acquire 83.9 million shares of Occidental’s common stock (at an exercise price of $62.50 a share), in exchange for Berkshire CEO Warren Buffett’s “seal of approval” for its deal.
  • Berkshire still held $8.5 billion of the preferred stock at the end of June 2025. By using cash, where it will earn less than a 4% return annually in the future, as opposed to swapping its 8% preferred stock to fund the OxyChem deal, it can afford to take a lower return on the acquired assets in the near to medium term.
  • We expect to increase our $730,500 ($487) per Class A (B) share fair value estimate slightly for the narrow-moat insurer based on what details we are seeing so far of the transaction.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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