Berkshire Hathaway is close to announcing a $30 – $35 billion acquisition of Precision Castparts, its largest acquisition ever.
I am quoted in an Omaha World-Herald article on this topic:
A 30 percent premium of about $250 a share for Precision Castparts’ 138 million shares would about match the company’s 52-week high and would suggest a purchase price of $34 billion. Precision Castparts has about $3.5 billion of long-term debt, which also would have to be figured in, as would Berkshire’s current stake worth about $800 million.
Cash at Berkshire Hathaway was reported in second-quarter earnings Friday at $66.58 billion, up about $2 billion from a quarter earlier. Dollar bills are the preferred acquisition currency for Buffett, who abhors using Berkshire shares to pay for transactions. Low interest borrowings also might be used, said David Kass, a Berkshire shareholder and business professor at the University of Maryland.
A $34 billion price tag for Precision Castparts would still leave about $33 billion in the Berkshire kitty.
“Berkshire wants to keep $20 billion in cash at all times,” Kass said. “This will be a friendly deal with current management kept in place to fit the Berkshire model.”
Kass said a buyout of Precision Castparts would be typical Buffett bargain-hunting, exemplifying the Oracle of Omaha’s determination to find cheap and out-of-favor companies with a history of strong earnings and high barriers to competition.