No. of Recommendations: 9
”it shouldn’t obscure that this is an exercise in repairing damage. Oxy’s acquisitions were supposed to propel it into the big leagues. But the point of getting bigger is to give yourself autonomy, the freedom to deploy capital efficiently and opportunistically. That can hardly be said of selling off your chemicals business in a year when its profit is expected to be the lowest in five years and bellwether rival Dow Inc.’s stock is down 39%. The fact that Berkshire is swooping in says it all, along with the added twist that Buffett helped Oxy dig its own hole.”
Deming’s view seems shortsighted to me. The other way to look at this as a long-term strategy playing itself out. Similar to Pfizer buying Seagen. Take on a lot of debt to acquire valuable assets for the future, and then work it out so that you’re left with a strong core business and a clear focus. Takes a while. But when it succeeds, the rewards usually justify the risk.
In this case, I remember Charlie describing the 2019 Andarko acquisition as a no-brainer. That was six years ago. This may be the last piece of that deal. It gives BRK a nice asset that Greg knows how to run. OXY gets a fair price and debt relief. The rest of the structure remained undisturbed. I trust Warren and Greg’s judgement that this will be good for BRK shareholders - and Vicky ain’t no slouch either. I still predict she will run BHE someday.
Disclosure: I’m currently long OXY, BRK, and PFE. Each of them still faces challenges of execution, but I like the odds so I’m putting my money where my mouth is. Onward!
abromber
