Warren Buffett’s Berkshire Hathaway has announced its intention to acquire Occidental Petroleum’s chemical division, OxyChem, for a substantial $9.7 billion. This advance is noteworthy as a big step-out for Berkshire. The point being, prior to the acquisition announcement, Warren’s company already owned more than 28% of Occidental’s stock. Buffett’s move is a signal of his continued intention to take advantage of Berkshire’s massive stockpile of cash. Those reserves have been climbing steadily and currently stand at an impressive $344 billion.
The deal is consistent with Buffett’s stated intention to continue being deeply involved with the management of Berkshire Hathaway’s wide-ranging portfolio. Having just purchased the firm himself, he went on to quell worries of investors with his dedication. He has plans to divest their stake in Occidental. Rather, as Buffett has so often done, he’s made a bet on the growth—and potential for profitability—in the sector.
Berkshire Hathaway has been methodically adding to its stake in Occidental in recent months. Buffett has made several more purchases over the years, proving his commitment and deep conviction that the company’s long-term value will shine through. In a recent shareholder letter, he went on to try and add clarity to that direction. He plans to eventually purchase less than half of Occidental and plans to move cautiously in terms of investment.
Besides its stakes in Occidental, Berkshire Hathaway is home to an idiosyncratic collection of companies from candy-making to railroad operating to insurance underwriting. First, picturing that quiet street, you’ve got to be frustrated. This includes household names such as Geico, Dairy Queen and See’s Candy. Along with important infrastructure investments, including the BNSF railroad and a number of big utility companies. Berkshire’s investment strategy is obviously different, as are their massive stock holdings of over $250 billion. This heavily concentrated portfolio includes large positions in Apple, Coca-Cola, Bank of America, and American Express.
In 2022, Buffett wrapped up the $11.6 billion acquisition of Alleghany insurance, which added to Berkshires diversification. The OxyChem acquisition is set to further strengthen this odd/inspired assortment of assets, providing a further layer of operational flexibility and strength.
Greg Abel, Vice Chairman of Berkshire Hathaway, expressed enthusiasm about the acquisition, stating, “Berkshire is acquiring a robust portfolio of operating assets, supported by an accomplished team.” He further noted, “We look forward to welcoming OxyChem as an operating subsidiary within Berkshire.”
The strategic acquisition reflects Berkshire Hathaway’s ongoing commitment to enhancing its investment footprint within the energy sector while maintaining its established strengths across various industries. Buffett appears to be very much personally directing the company in making these investments. Stakeholders should stay tuned for more thrilling progress paving the way for Berkshire’s long-term ambitious entrepreneurial growth strategy.
