This analysis delves into Warren Buffett's strategic decision to acquire OxyChem, a move poised to be his final significant deal as CEO of Berkshire Hathaway. This acquisition not only secures a stable income stream for Berkshire but also enhances the financial health of Occidental Petroleum, a key investment. The transaction leaves a considerable cash reserve for the incoming CEO, Greg Abel, empowering him to steer the company's future growth and investment strategies.
Details of the Landmark Acquisition and Its Strategic Ramifications
On October 13, 2025, Warren Buffett, the esteemed CEO of Berkshire Hathaway, orchestrated what is likely his concluding major acquisition before stepping down from his leadership role at year-end. Berkshire Hathaway entered into an agreement to purchase OxyChem, the petrochemical division of Occidental Petroleum, for a sum of $9.7 billion in an all-cash transaction. OxyChem is a prominent manufacturer of essential commodity chemicals utilized across diverse sectors, including water treatment, healthcare, and both commercial and residential development. This marks Berkshire's second significant foray into the chemicals industry, following its $9.7 billion acquisition of Lubrizol, a specialty chemicals producer, in 2011.
OxyChem is recognized for its robust operational strength and leadership position in its core product categories. Its expansive global presence guarantees consistent cash flow generation, even amidst market volatility. The company anticipates enhanced profitability in the coming years, driven by substantial investments in modernizing and expanding its Battleground plant and other facilities. These improvements are projected to contribute an additional $325 million annually to its Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) starting next year, thereby providing Berkshire with a dependable new revenue source.
Moreover, this acquisition offers considerable advantages to Occidental Petroleum, in which Berkshire Hathaway holds a substantial stake of nearly 265 million shares, constituting almost 27% of its outstanding shares. This makes Occidental Berkshire's seventh-largest holding, valued at over $11 billion. The proceeds from the sale will instrumental in Occidental Petroleum's efforts to achieve its long-term debt reduction objectives, allowing the company to concentrate on optimizing its valuable oil and gas assets. As Occidental's principal shareholder, Berkshire is positioned to directly benefit from the anticipated shareholder value creation.
Despite this significant expenditure, Berkshire Hathaway concluded the second quarter with a near-record cash reserve of $344 billion. This substantial liquidity has been amassed through the retention of operating business earnings and strategic divestments, notably a partial reduction of its extensive Apple holdings. The company's cash position surged by $70 billion over the past year, with no dividends distributed or share repurchases executed recently. Prior to the OxyChem deal, Berkshire's last major acquisition was the $11.6 billion purchase of Alleghany Corporation in 2022.
This ample financial flexibility provides Greg Abel, the incoming CEO, with considerable latitude to implement his vision for the company. He possesses the resources to undertake a landmark acquisition, potentially surpassing Berkshire's current record deal – the $44 billion acquisition of Burlington Northern Santa Fe in 2009. Abel could strategically deploy this capital early in his tenure or opportunistically acquire a high-quality company at an attractive valuation during a future market downturn. Alternatively, he might opt to increase investments in publicly traded companies, capitalizing on a significant stock market correction. The option also exists for Abel to enhance shareholder returns through initiating dividend payments or more regular share repurchases. Berkshire's formidable cash position grants him extensive options to shape the company's future trajectory and adeptly navigate evolving market dynamics.
Warren Buffett's final act as CEO through the OxyChem acquisition not only fortifies Berkshire Hathaway but also strengthens one of its most significant holdings. By strategically deploying a portion of its vast cash reserves, Berkshire gains a business with resilient and expanding cash flows, while simultaneously enabling Occidental Petroleum to reduce debt and sharpen its focus on creating shareholder value. Buffett's unwavering discipline in capital allocation throughout his tenure has created a robust financial foundation for Berkshire. The substantial cash reserves he leaves behind offer Greg Abel immense flexibility to drive future growth and enhance shareholder value. Abel is set to inherit a meticulously managed enterprise, anchored by a strong financial fortress and multiple avenues for sustained expansion, ensuring a promising future under his stewardship.
