Berkshire Hathaway Inc (NASDAQ:BRK/A), the conglomerate controlled by billionaire investor Warren Buffet, is near to closing in on its biggest acquisition as the company is negotiating a deal worth $30 billion to buy Precision Castparts Corporation (NASDAQ:PCP) which makes equipment for the aerospace and energy industries, according to The Wall Street Journal. The deal is to be announced as early as this week, according to a close person.
While having a cash pile of about $67 billion for potential deals, Berkshire Hathaway already controls a 3 percent stake in the Precision Castparts which has a market capitalization of $26.7 billion and employs about 30,000 people. This is the going to be the Buffet’s largest acquisition to date. Before this, the largest acquisition was the $26 billion purchase of the Burlington Northern Santa Fe railroad in 2010.
“That’s the classic Buffet playbook,” said David Rolfe, who manages about 11 billion, including Berkshire shares at Wedgewood Partners Inc. He also said “He is picking up a very unique franchise that can continue to consolidate the industry.”
Precision Castparts, the company being acquired is based in Portland, Oregon and it makes metal industrial components for jet engines and power plants as well as pipes for the oil and gas industry. It produced $2.6 billion of pretax operating income of $10 billion of revenue in its last fiscal year. Last year, 70 percent of the company’s sales were made from the aerospace industry and 17 percent from the energy market.
“Forget about a multi-quarter, this is a business that’s multi-decade in nature,” Rolfe said. “They have these incredibly long relationships with some of their customers. And people aren’t going to Fred’s moldings or Fred’s castings to get a little bit cheaper part on the inside of a jet engine.”
The company’s customer list include bigwig names like General Electric Co., Boeing CO., and Airbus Group SE.
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