This is Warren BuffeTt’s Last Rodeo

Warren Buffett has made what may be his final major acquisition, with Berkshire Hathaway purchasing the petrochemical division of Occidental Petroleum. Buffett already owns a large portion of Occidental — between 27% and 35% of its common stock — as well as a significant amount of preferred shares from an earlier deal. This new transaction provides Occidental with about $10 billion, which will help the company reduce its debt and improve its balance sheet. In turn, that benefits Buffett and Berkshire as major shareholders, creating what Doug and Lee describe as another example of Buffett’s classic “buddy deal.” The petrochemical division being acquired reportedly includes specialized products that are in high demand, making the move strategically sound beyond financial engineering. The 24/7 Wall St. hosts also note that Buffett may be setting up Berkshire’s future leadership transition, as Greg Abel takes over as CEO while Buffett remains chairman.

Doug McIntyre: Lee, you follow Warren Buffet more carefully than I do. He’s got a new transaction, big, compared to what he’s done recently. First question is why did he make this transaction? And the second one is, do you think this is the end for him? I mean, he doesn’t, he only has a few weeks in some ways.

Lee Jackson: Yeah. In fact, they even made a motion so they could separate the CEO and the chairman of the board because Mr. Buffet’s gonna remain the chairman of Berkshire Hathaway, but Greg Abel’s gonna be the CEO and they had to get in and fiddle around with the corporate docs to make sure that that was okay. But yeah, I think, I think he wanted to go out with a, with kind of a bang. But the, the interesting thing is, they’re buying the petrochemical division at Occidental, which he owns a ton of anyway. He owns 27, 30%, 35% of the common stock. He has a ton of preferred from when they did the deal at the I guess it was 2019, 2020, you know, when, when they Oxy did a big deal to buy another major oil company. So now, but it’s again, like we’ve been talking by buying the petrochemical unit off of Oxy, Oxy gets $10 billion, which helps to bring down their debt level and their debt service, which in turn helps the shareholder like above it, who has so much of it. And so it’s just like, it’s kinda like the, we’ve been talking, it’s just another good buddy deal that probably works out good because apparently their petrochemical division has some specialty, you know, not just the normal stuff that, that all the big boys have, but they have some specialty products that are, that are highly needed in the, in the universe. So I think you’re right. This, this could be his, his final rodeo.

Doug McIntyre: It’s also a last, it’s also a great way to buy and increase in the share price of the company you want.

Lee Jackson: Yeah. Well, and he’s down on, he’s, he’s got warrants to buy a ton of stock at like 60. And it’s, you know, Oxy Common, which is OXY, which is, and it’s like 45 or 44 or somewhere in that ballpark. And, you know, another thing that when he did help fund everything, he got a bunch of 8% preferred shares, which paid him hundreds of millions since the deal was done. And I’m trying to think of who he bought it. I think it was Anna Darko, but I remember, remember he helped them. It was either Anna Darko or somebody big like that. He helped, or Buffet helped Oxy buy them and incorporate them in, and that’s how he got all the preferred stock and all the common share. But I don’t know, it may be a while before he even sees break even on his common.