Does Buffett's Latest $9.7 Billion Deal Create a Buying Opportunity for Occidental and Berkshire Stock?

Key Points

• Warren Buffett's Berkshire Hathaway owns a big stake in Occidental Petroleum.

• Berkshire is set to buy Occidental's chemical business, OxyChem, for $9.7 billion.

• While Occidental will use the proceeds to repay debt, Berkshire is expanding its noninsurance portfolio.

• 10 stocks we like better than Berkshire Hathaway ›

Just before Warren Buffett retires as the CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) later this year, the company has struck its biggest deal in three years. On Oct. 2, Berkshire Hathaway announced an agreement to acquire Occidental Petroleum's (NYSE: OXY) chemical unit, OxyChem, for $9.7 billion in an all-cash deal. The deal is set to close in the fourth quarter.

Berkshire has been buying shares in Occidental Petroleum hand over fist since first investing $10 billion in its preferred shares and warrants in August 2019 to fund Occidental's Anadarko acquisition. By August 2025, Berkshire had accumulated a 32.7% stake in Occidental, and the oil and gas stock became the sixth-largest holding in Berkshire's portfolio.

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While many expected Berkshire to eventually acquire full control of Occidental, it is instead targeting only OxyChem, a leading manufacturer of chemicals like caustic soda, chlorine, and vinyls.

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Does the OxyChem deal make Occidental stock a buy?

There's a good reason why shares of Occidental tumbled after the announcement. Though Occidental is primarily an oil and gas producer, it was banking on businesses like OxyChem to fuel cash-flow growth in the coming years.

In the fiscal year that ended Dec. 31, 2024, OxyChem generated $1.1 billion in operating income, or about 16% of Occidental's total income in the year. Oil and gas was a major contributor, while the midstream and marketing segment made up just 8% of total profits. Occidental has been ramping up investments in OxyChem, raising its 2025 capital expenditures by about $200 million to $900 million.

All is not lost for Occidental, though. The oil stock has been weighed down by debt concerns since Occidental's 2024 acquisition of CrownRock for $12 billion, financed mostly through borrowing. The sale of OxyChem will free up $6.5 billion to repay debt immediately, significantly strengthening Occidental's balance sheet. It will also give the company leeway to resume share repurchases and support dividend growth. Occidental increased its dividend by 22% last year.

That said, shedding OxyChem will make Occidental a more pure oil and gas play, and therefore more susceptible to commodity prices. That, perhaps, is the biggest thing investors should consider before betting on the stock.

Does this deal make Berkshire Hathaway stock a buy?

Greg Abel, who will succeed Buffett as Berkshire Hathaway CEO, welcomed the addition of OxyChem as a subsidiary within Berkshire. As vice chairman of Berkshire's noninsurance operations and an energy expert, Abel likely influenced the OxyChem acquisition.

Berkshire Hathaway owns several businesses, including specialty chemicals company Lubrizol, which generated $6.4 billion in revenue in the fiscal year ended Dec. 31, 2024. OxyChem is, therefore, a good fit as it should complement Berkshire's chemicals business.

In the grand scheme, a $9.7 billion investment is more like a drop in the ocean for Berkshire, which is sitting on a massive cash pile of over $340 billion.

Buffett's Berkshire, in fact, may have just made a really smart move to buy a cash-generating chemical business rather than doubling down on Occidental and increasing Berkshire's exposure to volatile commodity prices.

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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.