Precision Castparts, based in Portland, Oregon, has been hit hard by tumbling crude and natural gas prices, but Buffet told CNBC that he would have bought the company even if he knew that commodities were in the midst of a multiyear slump.
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Precision Castparts makes nuts, bolts and other fasteners for aerospace companies such as Airbus and Boeing.
“I’ve admired PCC’s operation for a long time”, Buffett said in the statement. “For good reasons, it is the supplier of choice for the world’s aerospace industry, one of the largest sources of American exports”, said Berkshire Hathaway chairman Warren Buffett in the statement.
Precision Castparts said in July that it expects $10 billion to $10.4 billion of sales and an operating margin of about 27 percent in its current fiscal year, which ends in March.
Berkshire’s offer of $235 per share is a premium of 21.2% to Precision Castparts’ Friday close of $193.88.
But shares of Precision had been down almost 20% for the year, making it attractive to a value investor such as Buffett.
The deal, first reported by the Wall Street Journal on Saturday, is Berkshire’s biggest deal since its $26.5 billion takeover of Burlington Northern Santa Fe railroad in 2010.
Shares of Precision Castparts surged 19 percent, or $37, to $230.88 in early trading.
“Berkshire is now a sprawling conglomerate, constantly trying to sprawl further”, Buffett wrote in a February letter to shareholders.
Buffett ranks those unglamorous companies among what he calls the “powerhouse five” non-insurance businesses whose combined earnings are a cornerstone of Berkshire Hathaway’s financial performance.
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The acquisition would add to the list of brands Berkshire already owns and operates, including Fruit of the Loom, Dairy Queen and Geico. Berkshire Hathaway also has major investments in such companies as Coca-Cola, IBM and Wells Fargo & Co.
