As corporate giants continue to reassess their portfolios amid economic shifts, strategic divestitures are becoming a common tool for companies looking to streamline operations and optimize financial health. JPMorgan analyst Arun Jayaram weighed in on reports that Occidental Petroleum Corp. (NYSE:OXY) is in discussions to sell its OxyChem division to its largest shareholder, Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK), in a deal worth about $10 billion.
The Wall Street Journal first reported the potential transaction, which would involve OxyChem’s 23 chemical plants and its key chlorovinyls business.
Jayaram noted that the cited valuation essentially mirrors JPMorgan’s own net asset value estimate of $9.95 billion for OxyChem. While the timing of a sale would coincide with chemical margins near cycle lows, the deal would still imply a healthy multiple of roughly 8x 2025 EBITDA of $1.2 billion and 7x 2026 EBITDA of $1.4 billion.
Also Read: Why Buffett Is Splurging $10 Billion On OxyChem, Which Has Just $5 Billion In Revenue
The analyst described the proposed sale as a “big bang” approach to deleveraging, estimating that the proceeds would reduce Occidental’s leverage ratio by a full turn, bringing it down to between 0.7x and 0.9x, depending on the tax treatment. Such a balance-sheet reset could be attractive given the broader macro environment.
Still, Jayaram highlighted potential tradeoffs. The OxyChem unit was projected to generate a $460 million free cash flow boost in 2026, tied to the completion of the Battleground expansion project in Deer Park. Selling now would mean parting with that upside while monetizing the asset during a trough in the cycle.
Overall, JPMorgan kept a neutral stance, framing the sale as strategically accretive but not without long-term opportunity costs.
OXY Price Action: Occidental Petroleum shares were up 0.29% at $47.38 at the time of publication on Wednesday. The stock is trading within its 52-week range of $34.78 to $56.49, according to Benzinga Pro data.
Read Next:
Netflix Stock Slides As Musk Calls On Followers To ‘Cancel’ Subscriptions
Photo: Shutterstock
