Berkshire Hathaway is in talks to buy Occidental Petroleum’s OxyChem for $10 billion, possibly swapping preferred stock to fund the deal. Occidental aims to reduce debt to $15 billion, having paid down $7 billion already. Berkshire’s previous investment in Occidental included $10 billion for 8% preferred stock and warrants.

The purchase price for OxyChem may seem high at $10 billion based on expected pre-tax earnings of $850 million in 2023 and $1.1 billion in 2024. This deal would be Berkshire’s largest since buying Alleghany for $12 billion in 2021. Berkshire’s cash hoard remains large, and its fair value estimate stays the same pending more details on the transaction.

Read more at Morningstar: Occidental Deal Likely to be Funded by Redemption of Preferred Stock Holdings