In a strategic move that deepens its ties to the energy sector, Warren Buffett’s Berkshire Hathaway has struck a deal to acquire the OxyChem petrochemical division from Occidental Petroleum for a substantial $9.7 billion in cash. The transaction represents the most significant purchase by the sprawling conglomerate since its 2022 acquisition of insurer Alleghany and signals a confident deployment of its massive cash reserves, which are nearing a record high.

For Occidental Petroleum, the sale is a pivotal step in its aggressive debt-reduction strategy. The company has been actively divesting assets, particularly in the Permian Basin, to strengthen its balance sheet following its major CrownRock acquisition. Proceeds from the OxyChem sale, a significant portion of which will be used to retire debt, are expected to accelerate this financial overhaul.

Occidental’s CEO Vicki Hollub indicated that the improved financial footing will also allow the company to consider reinstating stock buybacks, a move closely watched by investors.

The market reaction saw Occidental’s shares dip following the announcement, reflecting the divestiture of a profitable unit. OxyChem, a leading producer of essential chemicals including chlorine for water purification and materials for plastics and road treatment, has been a consistent earner.

The unit is seen as a natural fit within Berkshire’s extensive industrial portfolio, complementing its existing holdings like Lubrizol. This acquisition further solidifies Berkshire’s already considerable stake in Occidental, cementing a complex financial relationship that includes preferred shares and warrants, even as Buffett has previously stated he has no intention of pursuing a full takeover of the oil giant.