Warren Buffett struck the largest deal of his life as Berkshire Hathaway agreed to buy engineering group Precision Castparts for $37.2 billion (€33.7bn) in a big bet on US manufacturing by the billionaire investor.
The acquisition marks Mr Buffett’s return to what he defines as “elephant” deals, as the latest takeover eclipses the $26 billion Berkshire paid in 2009 to buy a controlling stake in Burlington Northern Santa Fe, operator of the US’s second-biggest rail network.
The deal for Precision, which manufactures metal components for industrial gas turbines and supplies sectors including aerospace and the oil and gas industry, underlines Mr Buffett’s confidence in the recovery of US energy demand as the economy strengthens. Mr Buffett said: “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.”
The transaction has many traits of a typical Buffett deal: he already owned a minority stake in Precision; he is a big believer in nuts-and-bolts industrial groups; and the company’s share price had come under pressure, falling by about a tenth.
To finance the deal, Berkshire will use about $23 billion of its own cash and will borrow about $10 billion. Before the deal Berkshire had a cash pile of about $67 billion.
Mr Buffett (84) ruled out any further megadeals for the next year.
– Financial Times Limited
