Berkshire Hathaway, the sprawling industrial empire that includes Burlington Northern Santa Fe railroad and Fruit of the Loom underwear, is near a deal to buy the metal parts manufacturer Precision Castparts, a person briefed on the matter said.
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There are reports saying the deal could be worth more than $30 billion.
Berkshire Hathaway already holds a three per cent stake in Precision Castparts, and it’s reported that a deal could be agreed upon within the week.
Warren Buffett, the octogenarian multibillionaire investor, is homing in on his biggest acquisition – a maker of aircraft parts and energy production equipment that is likely to cost his Berkshire Hathaway conglomerate more than $30bn (£19bn).
Buffett’s Berkshire Hathaway Inc.is buying Precision which had a market value of US$26.7 billion as of Friday’s close.
And increasingly, Berkshire, whose market value stands at $354 billion, needs to strike enormous deals to continue growing its profits and revenue. It would not only be the largest takeover in Buffett’s five-decade investing career at Berkshire, but also a standout in a banner year for mergers in general, with $2.7 trillion in acquisitions already announced.
Precision Castparts produces structural investment castings, forged components, and airfoil castings for aircraft engines and industrial gas turbines. Precision Castparts shares have dropped 20 per cent this year, hit by declining demand for pipes used by energy companies.
Since June 2014, shares of the company have plummeted almost 29%.
During a conference call with analysts, Precision Castparts’ Chairman and CEO Mark Donegan highlighted “a challenging oil and gas environment”. Take the case of Procter & Gamble Co., the razor maker that has long been closely associated with the billionaire and was his third-largest position at the end of 2008.
A deal would push Berkshire further into heavy industry and cut reliance on insurance and stock picking, growth engines for most of Buffett’s 50 years in charge.
Warren Buffett’s Berkshire Hathaway could be on the verge of closing its biggest deal ever. (The conglomerate reported a 37 percent decline in its second-quarter earnings on Friday.).
The company may not have the name recognition of H.J. Heinz, which Berkshire bought along with the investment firm 3G Capital in 2013. The smaller positions in Berkshire’s portfolio are usually stocks picked by one of Mr. Buffett’s two investment managers.
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The company reported a profit of US$1.53 billion on net sales of US$10 billion for its fiscal year ended March 29.
