The transaction is valued at approximately .2 billion including outstanding PCC net debt.
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Berkshire Hathaway’s Berkshire Hathaway’s Warren Buffett has loaded up and fired his so-called “elephant guns” for a mega-sized corporate takeover.
Warren Buffett is making the biggest bet of his long investment career, a $32.36 billion buyout of Precision Castparts in a deal that will continue to reshape his Berkshire Hathaway conglomerate. Precision Castparts’ stock has lost 20% year to date through Friday, while the S&P 500 has gained 0.9%.
“People are looking at this as a buying opportunity”, Larry Weiss, head of trading at brokerage Instinet, said of the Precision Castparts deal.
The deal pushes Berkshire further into heavy industry and cuts reliance on insurance and stock picking, growth engines for most of Buffett’s 50 years in charge. Buffett, 84, has become a legend for the performance of Berkshire, earning him the nickname the “Sage of Omaha” for his investment savvy.
In a statement today, Buffett said he had “admired PCC’s operation for a long time”.
Precision Castparts is a manufacturer of complex metal components and products particularly for the aerospace and energy industries.
From the Berkshire perspective, theyre getting a good company on sale, Shields said.
The boards of Precision Castparts and Berkshire Hathaway Inc. unanimously approved the transaction, which is expected to close in 2016’s first quarter. The acquisition of the aerospace company would be one of Buffett’s largest deals ever. Schoonmaker said once Berkshire buys a company, it has a history of investing in that business.
The legendary investor admitted he was paying a high price for PCC, telling CNBC, “In terms of price-earnings multiple going in, this is right there at the top”.
Keith Schoonmaker, an analyst with Chicago-based investment research firm MorningStar, said one of the things that makes Precision Castparts special is that it has what’s called an “economic moat”.
Shares of Precision Castparts soared 19.10 percent to United States dollars 230.92 apiece on Monday. The acquisition fits Buffett’s mold, but coincides with cyclical highs in plane orders, stock valuations and M&A. Berkshire Class B shares fell 1.4 percent to $141.60.
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Since Precision Castparts’ fiscal 2015 returns were solid but did not keep up with obligations, its funding deficit jumped.
