Aug 102015
 

Berkshire Hathaway will acquire Precision Castparts (PCP) for $235 per share in cash, or a 21% premium over Friday’s closing price of $193.88.  The transaction is valued at $34.2 billion ($37.2 billion including debt) and is Berkshire’s largest acquisition in its 50-year history.  Berkshire will be using about $23 billion of its cash along with borrowing $10 billion to purchase PCP’s outstanding shares.  This deal is expected to close during the first quarter of 2016.  As of March 31, 2015, Berkshire owned about 3% of PCP’s shares.  This initial investment in PCP was made between 2012 and 2015 by Todd Combs, one of Warren Buffett’s two portfolio managers.

Precision Castparts supplies parts such as fasteners and turbine blades to aircraft makers, and it makes pipes and other equipment for power stations and the oil-and-gas industry. In 2014, approximately 75 percent of Precision’s sales were to the aerospace industry, the other 25 percent coming from the energy and power sectors.

I am quoted in an Omaha World-Herald article on this topic:

“I think the $235 per-share, a 21 percent premium, is a great deal for Berkshire,” said David Kass, a Berkshire shareholder and business professor at the University of Maryland.

The entire article is available at:

http://www.omaha.com/money/berkshire-hathaway-buying-precision-castparts-for-b-buffett-s-largest/article_078e4b96-3f58-11e5-9c83-8b4b5d1c1cb3.html

I was also quoted in U.S. News & World Report:

“Buffett’s investment in Precision Castparts is specific to the company,” says David Kass, clinical associate professor of finance at the University of Maryland’s Robert H. Smith School of Business. He also runs a blog dedicated to Berkshire Hathaway (BRK-A, BRK-B) and the Oracle himself.

“In fact, at recent Berkshire annual meetings, he has expressed his skepticism about investing in airlines,” Kass says. “Berkshire does not own any airline stocks in its equity portfolio.”

Not that Berkshire is struggling. Kass notes that in the wake of this acquisition, “everyday investors can benefit by investing in Berkshire Hathaway class B stock at its current price of about $142 per share.” But prepare for a prolonged flight: “Buffett has a very long time horizon,” he says.

The entire article is available at:

http://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/08/11/precision-castparts-is-warren-buffetts-biggest-bet

 Posted by at 8:12 am

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