Warren Buffett, the "Oracle of Omaha," has made his largest acquisition in three years. Berkshire Hathaway, led by Buffett, will acquire the petrochemical subsidiary "OxyChem" from U.S. energy corporations Occidental Petroleum for $9.7 billion (about 13 trillion won). This transaction is Berkshire's biggest investment since the 2022 purchase of insurer Alleghany and is seen as the return of Buffett's signature "buy at the economic trough" strategy.
On the 21st (local time), according to U.S. investment outlet Motley Fool and other foreign media, OxyChem is a leading global petrochemical corporations that produces basic chemical materials such as caustic soda, chlor-alkali, and PVC. However, its performance has been sluggish recently due to a global economic slowdown and weak raw material prices. Pre-tax profit in the second quarter of this year was $213 million, a sharp drop from a year earlier. In this situation, Berkshire decided to buy, judging it to be "an opportunity to scoop up quality asset cheaply at the cyclical bottom." The transaction price is about eight times OxyChem's expected cash generation next year, similar to the industry average, but analysts say high returns can be expected if the industry recovers.
This acquisition was led by Vice Chairman Greg Abel, regarded as Buffett's successor. He emphasized OxyChem's long-term growth potential, calling it a "corporations with solid operating asset and a skilled workforce." Berkshire pushed the transaction using only a portion of its roughly $340 billion in cash-like asset. This reduces the burden of holding a large cash pile while securing a stable cash flow.
For Occidental, the sale is largely about "securing cash." The company took on massive debt last year to acquire shale player CrownRock. Total liability now stands at $24 billion, and $6.5 billion of the sale proceeds will go to debt repayment, with the remainder used for working capital.
Berkshire will gain indirect benefits as well as direct revenue from this transaction. As it holds a 28% equity in Occidental, improvements to the parent company's liability structure translate into higher investment value for Berkshire. Berkshire also still holds $8.5 billion in Occidental preferred stock, so it will continue to receive a fixed dividend of 8% annually. That far exceeds the yield on short-term U.S. Government Bonds.
The market is calling the acquisition a "quintessential Buffett move." With sentiment subdued on recession fears, Berkshire leveraged its vast cash to buy undervalued asset and set the stage to maximize revenue in a recovery phase. If OxyChem's results rebound starting in 2026, the investment is likely to turn into a high-return, long-term play.
Buffett is set to step down as Berkshire's chief executive officer by the end of this year, but he is practicing his philosophy of value-centered investing to the end. His conviction in real-economy-based asset such as energy, manufacturing, and infrastructure remains intact. One analyst said, "Buffett acts in a crisis and buys opportunities when others are afraid," adding, "This acquisition is a perfect example of that philosophy."