Berkshire’s “heir apparent” makes his first major deal: Buffett-style shrewdness, Occidental Petroleum’s stop-loss

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Berkshire Hathaway has agreed to acquire Occidental Petroleum’s chemical business, OxyChem, for $9.7 billion—a landmark deal orchestrated by Greg Abel, who has been designated as Buffett’s successor. This all-cash transaction exemplifies the classic “Buffett-style” shrewdness: not only does it help debt-laden Occidental reduce its leverage, but it also enables Berkshire to acquire one of the world’s largest independent chemical producers at a reasonable price.

On Thursday, Berkshire Hathaway agreed to acquire OxyChem, the chemical subsidiary of Occidental Petroleum, for $9.7 billion in cash. The deal, planned by Greg Abel (Buffett’s named successor as CEO), marks the first major acquisition he has led since his position as heir became clear.

For heavily indebted Occidental, this sale represents a critical step towards trimming its debt, which totals as much as $24 billion. The company said on Thursday that $6.5 billion of the proceeds from the deal will go directly towards debt repayment, in order to bring its total debt below $15 billion. The market reacted negatively to the deal’s “bail-out” nature, with Occidental shares closing down 7.3% after the announcement. TD Cowen analysts noted that although the deal helps reduce debt, it comes at a time when OxyChem’s capital expenditures for a years-long expansion are peaking, so the expected turning point for free cash flow in coming years will be lost.

For Berkshire, meanwhile, the deal truly kills two birds with one stone. As Occidental’s largest shareholder (holding 29.6%), Berkshire’s cash infusion helps a core company in its investment portfolio repair its balance sheet and stabilize the value of Berkshire’s own holding. At the same time, acquiring OxyChem gives Berkshire control of one of the world’s largest independent chemical manufacturers, further expanding its industrial operations.

Occidental’s Self-Rescue: Selling Core Assets to Repair the Balance Sheet

Selling OxyChem is a costly but imperative “cut off to survive” for Occidental’s CEO Vicki Hollub. The company’s heavy debt load comes mainly from two major acquisitions: the $55-billion purchase of Anadarko Petroleum in 2019 (supported by Buffett’s financing) and the $12-billion acquisition of shale oil producer CrownRock announced in 2023.

These transactions left Occidental’s leverage among the highest in the industry, especially as OPEC+ production increases have weakened the oil market, fueling investor fears about the company’s balance sheet. Shares have fallen more than 17% in the past year. According to media commentary, Occidental’s net debt in 2025 was projected to be 1.7 times EBITDA before the transaction.

For Occidental, this deal is a “timely rain” to repair its finances. CEO Vicki Hollub said OxyChem has become "a well-run, safe and reliable business" under its parent company, generating nearly $5 billion in revenues in the 12 months through June this year.

Analysts point out that this move will help Occidental achieve its debt target. Matt Portillo, an analyst at TPH & Co (a Perella Weinberg Partners energy business), said the deal is expected to bring debt levels within target and open the door to higher shareholder returns like stock buybacks. Michael Alfaro, chief investment officer of hedge fund Gallo Partners, went further, saying that without Berkshire’s help, Occidental could not have achieved its debt goals until at least 2028.

Berkshire's Calculus: A Classic “Win-Win” Deal

From Berkshire’s perspective, the transaction is classic “Buffett-style” smart deal-making. As Occidental’s largest shareholder, its common equity holding is currently under water. Deploying cash to help Occidental deleverage is essentially a way to protect and restore the value of its own investment.

Greg Abel also made this clear in the announcement, noting that the proceeds would be used to reduce debt. According to people familiar with the matter, the deal is an all-cash purchase, rather than being settled with Berkshire’s Occidental shares—underscoring the primary goal of helping Occidental deleverage. This contrasts with Berkshire’s 2014 acquisition of Duracell from Procter & Gamble, which was paid for with its P&G shares.

Beyond financial synergy, the acquisition brings significant strategic value to Berkshire itself. After the deal, Berkshire will control one of the world’s largest independent chemical producers, putting it on par with industry giants like Dow Chemical and LyondellBasell. Berkshire already owns Lubrizol, and while this purchase comes at a downturn in the chemical sector with sluggish demand and oversupply, as Abel said, Berkshire is acquiring "a strong portfolio of operating assets backed by an excellent team."

The deal is also Berkshire’s largest since its $11.6 billion purchase of insurer Alleghany in 2022, showing successor Abel’s decisiveness and style in capital allocation.

Future Speculation: Weakening Expectations for a Full Takeover

For years, the market has speculated whether Buffett would eventually acquire all of Occidental. However, the OxyChem deal has lowered expectations for a full acquisition.

According to media commentary, selling the chemical business makes Occidental’s operations simpler and more focused as an upstream oil and gas producer. While this sheds historical baggage, it also lowers the complexity and appeal of a total Berkshire buyout. A slimmer, financially healthier Occidental may instead become a takeover target for other large energy companies in the next wave of industry consolidation.

All in all, this deal creates a unique “win-win” scenario—with Berkshire the winner on both sides. Buffett’s company acquires a quality asset at a “forced seller’s” price, while ensuring the proceeds strengthen its massive investment in another company. It’s a textbook answer from Abel, Buffett’s heir apparent.

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