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Berkshire Hathaway said on Monday that it had agreed to acquire the metal parts manufacturer Precision Castparts for $37.2 billion, including debt, in one of the largest takeovers ever undertaken by the billionaire Warren E Buffett at the company.
As it has grown, the sprawling industrial empire Berkshire Hathaway, with holdings in railroads, insurance, retail and manufacturing, has increasingly looked to strike enormous takeovers in order to lift profit and revenue. The company's market value is $354 billion, and its businesses include Burlington Northern Santa Fe railroad and Fruit of the Loom underwear.
At $37.2 billion, the Precision Castparts deal is a standout transaction in what has been a banner year for mergers, with more than $2.7 trillion in acquisitions already announced. Under the terms of the deal, Berkshire will pay $235 a share for the Precision Castparts Corporation, representing a 21 per cent premium to its closing price on Friday.
"I've admired PCC's operation for a long time," Buffett said in news release on Monday. "For good reasons, it is the supplier of choice for the world's aerospace industry, one of the largest sources of American exports. Berkshire's board of directors is proud that PCC will be joining Berkshire."
Berkshire had been an investor in Precision Castparts since 2012 and is one of its largest shareholders with a roughly three per cent stake.
The deal comes two years after Berkshire teamed up with the Brazilian investment firm 3G Capital to buy Heinz for $23 billion. This year, 3G and Berkshire struck a separate deal to combine Heinz with Kraft, the maker of macaroni and cheese, Oscar Mayer meats, Planters nuts and Jell-O. The transaction for Precision Castparts, news of which emerged over the weekend, is subject to shareholder and regulatory approval, and is expected to close in the first quarter of 2016. The company will continue to do business under the Precision Castparts name and maintain its headquarters in Portland, Ore, after the deal is complete.
Precision Castparts manufactures a variety of metal parts used in products like aircraft engines and gas turbines. The company reported $1.5 billion in profit for the year that ended March 29, on $10 billion in sales. It began operating under the Precision Castparts name in 1953, and employs more than 30,000 people at 155 plants worldwide.
"We see a unique alignment between Warren's management and investment philosophy, and how we manage PCC for the long term," Mark Donegan, the Precision Castparts chairman and chief executive, said in a news release. "We believe that as part of Berkshire Hathaway, PCC will be exceptionally well-positioned to support our customers' needs into the future."
For Berkshire, the deal came as the conglomerate has been sitting on a pile of cash to invest, nearly $67 billion as of June 30.
Precision Castparts is expected to fit in nicely with the conglomerate's other industrial acquisitions in the last decade, including the chemical maker Lubrizol and the industrial manufacturer Marmon.
© 2015 The New York Times News Service
BIG MONEY
- Berkshire Hathaway is valued at $354 billion
- At $37.2 billion, the Precision Castparts deal is a standout transaction in what has been a banner year for mergers
- Under the terms of the deal, Berkshire will pay $235 a share for the Precision Castparts Corporation, representing a 21 per cent premium to its closing price on Friday
- Berkshire had been an investor in Precision Castparts since 2012 and is one of its largest shareholders with a roughly three per cent stake
