Berkshire Hathaway’s Berkshire Hathaway’s Warren Buffett has loaded up and fired his so-called ‘elephant gun’ for a mega-sized corporate takeover. On Monday morning, Berkshire confirmed it would buy aerospace components giant Precision Castparts Precision Castparts for $235 a share in cash, valuing it at $32.3 billion, exclusive of the Portland, Oregon based company’s near $5 billion in debt.
On Monday morning, Berkshire confirmed it would buy aerospace components giant Precision Castparts Precision Castparts for $235 a share in cash, valuing it at $32.3 billion, exclusive of the Portland, Oregon based company’s near $5 billion in debt. The deal comes at a 20% premium to Precision Castparts closing share price on Friday, however, it amounts to a slight discount from the company’s stock price at the beginning of 2015.
For Berkshire Hathaway, the deal is a major bet on U.S. aerospace and manufacturing, bringing a top parts supplier to defense and aviation companies around the world into the coffers of Buffett’s conglomerate. With over $10 billion in annual sales, Precision Castparts would instantly become one of Berkshire’s largest operating subsidiaries. The company reported a $1.5 billion profit in 2014, slightly less than the profits Berkshire’s energy unit generated last year.
Warren Buffett speaks during the Forbes’ 2015 Philanthropy Summit Awards Dinner on June 3, 2015 in New York City. (Photo by Dimitrios Kambouris/Getty Images)
The acquisition trumps Berkshire’s takeover of railroad BNSF in 2009, and its subsequent deals for Lubrizol Lubrizol and Heinz. It also adds to a busy year for Berkshire and Buffett. Earlier in 2015, Buffett helped orchestrate Heinz’s $40 billion takeover of Kraft Foods Kraft Foods, alongside 3G Capital, creating the Kraft Heinz Company.
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About Monday’s deal, Buffett said in a press release, “I’ve admired PCC’s operation for a long time. 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.”
“This transaction offers compelling and immediate value for our shareholders, and allows PCC’s employees to continue to operate in the same manner that has generated many years of exceptional service and performance to our customers,” added Mark Donegan, CEO of Precision Castparts.
Precision Castparts will continue to do business under its name and maintain its headquarters in Portland, Berkshire said in a press release.
Credit Suisse acted as financial advisor to Precision Castparts, while Cravath, Swaine & Moore and Stoel Rivesv are legal counsel. Berkshire Hathaway’s legal counsel is Munger, Tolles & Olson, and the conglomerate didn’t disclose any financing sources or underwriters to its cash takeover.
Precision Castparts surged nearly 20% in pre-market trading to $231 a share.
On Friday evening, Berkshire Hathaway reported a 37% drop in second quarter profits, weighed by falling insurance earnings and a plunge in investment gains.
Article originally posted in Forbes website.