Berkshire Hathaway Pays $9.7 Billion for Occidental's OxyChem Unit as Chemical Stocks Rise on Deal

Buffett’s $9.7 Billion Chemicals Deal Sets the Tone for Cyclical Assets

Berkshire Hathaway’s biggest buy in three years plants a firm valuation marker in the chemical industry, even as demand drags.

Warren Buffett has made his move again. On Thursday, Berkshire Hathaway announced it’s buying OxyChem—Occidental Petroleum’s chemical arm—for $9.7 billion in cash. That’s not just another acquisition. It’s Berkshire’s largest deal since 2022, and it immediately sent a ripple through chemical stocks, giving Wall Street its clearest signal yet on how much chlor-alkali assets are worth.

The deal, expected to close by the end of 2025 if regulators sign off, hands Berkshire a new industrial cash machine to run alongside Lubrizol, another chemicals unit it already owns. For Occidental, the sale is less about empire-building and more about cleaning house. Roughly $6.5 billion of the proceeds will go toward chopping down its hefty debt pile, especially after the costly CrownRock purchase earlier this year.

Investors wasted no time reacting. Shares of Dow jumped nearly 2%, Celanese soared 5%, and even fertilizer producers like Nutrien and Mosaic climbed, though their gains looked more like sympathy moves than direct benefits. Occidental stock, however, took the hit—dropping almost $3—because the company just traded away a steady cash generator for more exposure to the ups and downs of oil prices.

OxyChem

Why the Price Matters So Much

What’s really buzzing on Wall Street isn’t just the size of the deal—it’s the price Berkshire agreed to pay. Analysts peg OxyChem’s 2025 earnings at around $1.2 to $1.3 billion before interest, taxes, and depreciation. Berkshire’s offer values the unit at about 7.5 to 8 times those earnings. That’s not bargain basement, and it’s not frothy either. It’s what pros call “mid-cycle”—a level that makes sense if you believe the industry has steady long-term value despite short-term demand struggles.

This is where it gets interesting. Publicly traded peers like Olin and Westlake are priced at similar or even lower multiples, but those valuations come with a cloud of skepticism because earnings have been weak. By stepping in, Berkshire is effectively telling the market: “This is the floor.” That validation could eventually force a rethink of how investors value other chlor-alkali and PVC producers.

And the weight of the buyer matters here. Buffett and his lieutenants aren’t known for overpaying or throwing lifelines. When they write a $10 billion check, it means they see staying power.

Why Berkshire Wanted OxyChem

Greg Abel, Buffett’s right-hand man and the company’s future leader, spearheaded the deal. Abel has consistently pushed Berkshire deeper into industrial businesses, and OxyChem is a natural fit. The unit makes chemicals used in everything from water treatment to medical products—steady, useful, and not nearly as whiplash-inducing as oil prices.

The playbook looks familiar: buy a reliable cash generator at a fair price, hold it forever, and let the compounding do the work. Unlike Lubrizol, which focuses on specialty chemicals, OxyChem makes bulk products, so the two businesses don’t step on each other’s toes. Regulatory risk seems minor, aside from the usual environmental reviews, since Occidental is holding on to the legacy liabilities.

There’s also Berkshire’s deeper tie to Occidental itself. The conglomerate already owns close to 28% of the oil producer through a mix of common stock and preferred shares. But Buffett has said again and again he isn’t looking to swallow the whole company. Buying OxyChem gives Berkshire the prize asset it wants without inheriting the oil producer’s rollercoaster earnings.

Occidental’s Trade-Off

Occidental’s strategy is clear: lighten the debt load and strengthen the balance sheet. Cutting debt below $15 billion could allow the company to restart share buybacks once oil markets stabilize—a carrot investors have been waiting for.

But there’s no free lunch. Selling OxyChem removes one of the company’s steadiest income streams. Without it, Occidental’s fortunes are tied more tightly to oil prices. That means bigger swings—both up and down. The stock’s drop after the announcement showed investors aren’t entirely comfortable with that trade-off.

The State of the Chlor-Alkali Market

Timing plays a big role here. Right now, demand for caustic soda—the chemical used in refining, pulp, and water treatment—remains fairly solid. PVC, however, is still limping along, weighed down by weak housing construction. Most analysts don’t expect a real rebound in PVC until 2026.

OxyChem’s resilience this year, holding profits steady despite those headwinds, underscores why Berkshire liked what it saw. Caustic soda strength balanced out PVC weakness, proving the business can grind through tough cycles. That’s exactly the kind of stability Berkshire bets on: get in at a fair price today, then ride the wave when PVC demand eventually comes back.

For other producers, the deal is both reassuring and challenging. On one hand, it sets a valuation benchmark. On the other, it raises the bar—investors won’t rerate their stocks until earnings recover in a visible way.

What It Means for Investors

The aftershocks of this deal will spread unevenly. Chlor-alkali and PVC producers stand to gain the most from Berkshire’s stamp of approval, though not overnight. Fertilizer makers, acetyl producers, and polyolefin companies probably shouldn’t read too much into it—this transaction has little to do with their fundamentals.

For anyone watching the space, the key is cycle timing. If PVC remains in the doldrums through 2025, don’t expect public stocks to suddenly catch fire just because Buffett opened his wallet. Investors should instead keep an eye on contract prices for caustic soda, spreads for ethylene dichloride, and maintenance schedules at big plants in Europe. Those details may drive margins just as much as demand shifts.

Looking Ahead

At the end of the day, Berkshire’s $9.7 billion splash does two things. It gives Occidental breathing room while exposing its shareholders to more oil risk, and it tells the market where mid-cycle chemical assets should be valued.

For Buffett’s camp, the logic is classic: buy an asset that prints cash across cycles, ignore short-term noise, and hold it for decades. For Wall Street, the message is equally clear: private buyers are willing to pay more for these assets than public markets currently reflect.

Whether that gap closes in the next few quarters or drags into 2026 depends on how quickly demand bounces back. But one thing is certain—this deal just reset the valuation yardstick for an entire corner of the chemical world.

House Investment Thesis

Category	Details
Deal Summary	Parties: Occidental Petroleum (Seller) & Berkshire Hathaway (Buyer) Asset: OxyChem chemicals subsidiary Value: ~$9.7B cash Expected Close: Q4 2025 Use of Proceeds: ~$6.5B for debt reduction, targeting principal debt below ~$15B post-CrownRock.
Valuation	Implied Multiple: ~7.8x EV/EBITDA (based on 2025E EBITDA of ~$1.24B). Seen as a fair, mid-cycle private market multiple. Peer Context: In line with public comps like Westlake (WLK, ~6-10x) and Olin (OLN, high-single digits).
Strategic Logic	For Berkshire: Classic playbook: durable, cash-generative asset at a fair price. Fits with Greg Abel's strategy and pairs with Lubrizol. Minimal antitrust risk. For Occidental: Accelerates deleveraging, clears path for future buybacks. Trade-off: equity becomes more beta to oil prices, losing OxyChem's counter-cyclical earnings.
Market Read-Through	Valuation Floor: The 7-8x multiple sets a floor for integrated chlor-alkali/PVC platforms, supporting sentiment for OLN and WLK. Cycle Position: Caustic strength is offsetting PVC softness; PVC up-cycle is expected ~2026.
Positioning & Trade Ideas	1. Olin (OLN): Preferred over WLK for higher beta to price up-moves. 2. Westlake (WLK): Quality compounder; clean proxy for the "valuation floor." 3. Other Chemicals (CE, DOW, LYB): Fade sympathy rallies; no fundamental read-through. 4. Fertilizers (NTR, MOS): Unrelated pop is noise; fade. 5. Occidental (OXY): Now a "barbell" investment: cleaner but spikier. Own for oil price/DAC/buybacks, not stability.
Risks & Watch Items	Cycle Timing: PVC demand recovery could lag into 2026, delaying re-rating. Operational: Outages and European rationalization can whipsaw margins. Regulatory/Closing: Deal slippage past Q4'25 would dent OXY's debt reduction timeline.
Bottom Line / Conviction	Biggest Takeaway: Private-market validation at a mid-cycle multiple is supportive for OLN/WLK re-rating. Scope: Read-through is specific to chlor-alkali/PVC, NOT fertilizers or polyolefins. OXY Post-Deal: Equity is cleaner but spikier, more levered to oil. Berkshire's Move: A long-term, cash-flow compounder acquisition, not a timing bet.

NOT INVESTMENT ADVICE