00:00Berkshire Hathaway is ready to make its biggest acquisition in three years.
00:03The company reaching a deal to buy Occidental Petroleum's chemicals unit for about $9.7 billion in an all-cash deal.
00:11For more on this M&A, we're joined by Bloomberg Intelligence senior analyst Matthew Palazzola.
00:16And Matt, it's interesting because they already own a massive stake in the parent company, Oxy, I think like 27%, right?
00:25Yeah, so they own about $11 billion worth of Oxy stock.
00:30I mean, I think it's a good deal, Matt, for both the $9.7 billion price tag.
00:37That allows Occidental to deleverage a little bit, and they are highly levered compared to peers, which could help the equity.
00:44So while I think the business is a good business for Berkshire to get, it also helps Occidental in their goals, so it might help the stock as well.
00:53Matt, it does seem like an era where heavy industry companies are looking at paying down debt,
00:58selling off parts of their business.
01:01Does it underlie maybe more stress or just a moment of transition for the wider industry?
01:08Yeah, Danny, I'm an insurance guy, so don't kill me on the comments about the chemicals industry.
01:14But I think what is happening specifically with this deal is Oxy was very highly levered.
01:21Part of that was acquisitions they made.
01:24So they were lacking a lot of financial flexibility.
01:26So they kind of needed to do something.
01:29Part of that was – part of their lack of financial flexibility was the preferred stock that Berkshire owns in them.
01:34So they needed to do that.
01:38We're at like kind of peak – or I'm sorry, trough cycle earnings for the chemical industry.
01:43So it was another kind of disadvantage for Oxy and advantage for Berkshire in this deal.
01:48So let's go ahead and see what's going on in the middle of this deal.
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