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\n \n Occidental, facing substantial debt on its balance sheet, was motivated to sell OxyChem, especially as the chemical markets are currently at a low point in their cycle. Analysts at JPMorgan noted, “One of the key tradeoffs was timing, as OXY is selling OxyChem at below mid-cycle cyclical conditions for chemicals.” This timing could be crucial for both parties involved in the deal.\n <\/p>\n \n However, the market may not have fully anticipated a significant aspect of the transaction: Occidental will retain OxyChem’s environmental liabilities, which amount to $1.9 billion, as stated in its latest securities filing. Mizuho highlighted this risk, noting, “OXY is retaining ~$1.9 billion of environmental remediation liabilities (as of YE24), which is a risk to future cash flows if the actual cost of remediation exceeds the current assessed value.”\n <\/p>\n \n Additionally, Occidental will miss out on a projected cash flow boost from the expansion of OxyChem’s Battleground plant in 2026. JPMorgan estimates that this expansion could have increased Occidental’s cash flow by $460 million annually starting that year. When considering approximately $1.7 billion in tax leakage, the after-tax value of the sale is closer to $8 billion, according to their analysis.\n <\/p>\n \n The terms of the deal likely contributed to a more than 7% drop in Occidental’s shares on the day the acquisition was announced. Buffett’s involvement with Occidental dates back to 2019 when he played a pivotal role in financing Occidental’s acquisition of Anadarko Petroleum with a $10 billion commitment. In return, he received preferred shares and warrants to purchase additional common stock.\n <\/p>\n \n By early 2022, Buffett began acquiring Occidental’s common stock on the open market, ultimately securing a 28.2% stake by the end of June this year, making him the largest shareholder in the energy giant. Currently, Occidental pays an 8% dividend on Berkshire’s preferred stake and a 2.1% dividend yield on its common stock at prevailing prices, providing Buffett with substantial payouts even before the OxyChem acquisition.\n <\/p>\n \n Occidental’s CEO, Vicki Hollub, mentioned that as the company increases its cash reserves, it plans to start redeeming Berkshire’s preferred stock in 2029. This strategic move indicates a focus on strengthening the company’s financial position while navigating the complexities of the current market landscape.\n <\/p>\n \n (Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here.)\n <\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":" Warren Buffett’s keen dealmaking instincts remain sharp, even as the 95-year-old legendary investor approaches the end of his tenure as CEO of Berkshire Hathaway. Recently, Berkshire announced a significant acquisition: the purchase of Occidental Petroleum’s chemical division, OxyChem, for an impressive $9.7 billion in cash. This marks Buffett’s largest acquisition since 2022 and underscores his […]<\/p>\n","protected":false},"author":1,"featured_media":2372,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[],"class_list":["post-2371","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts\/2371","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/comments?post=2371"}],"version-history":[{"count":0,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/posts\/2371\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/media\/2372"}],"wp:attachment":[{"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/media?parent=2371"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/categories?post=2371"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/igorsplayground.com\/appcheckr\/wp-json\/wp\/v2\/tags?post=2371"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n Warren Buffett’s keen dealmaking instincts remain sharp, even as the 95-year-old legendary investor approaches the end of his tenure as CEO of Berkshire Hathaway. Recently, Berkshire announced a significant acquisition: the purchase of Occidental Petroleum’s chemical division, OxyChem, for an impressive $9.7 billion in cash. This marks Buffett’s largest acquisition since 2022 and underscores his investment strategy of acquiring quality businesses at favorable prices while avoiding potential pitfalls.
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