We did a story a few days ago about the alleged Berkshire Hathaway’s multi billion dollar deal. Well, the deal has finally been completed. Warren Buffet’s Berkshire Hathaway Inc (NASDAQ: BRK/A) has bought Precision Castparts Corporation (NASDAQ:PCC) at a whooping $37.2 billion.
Warren Buffett has become a legend for the performance of Berkshire, earning him the nickname the “Sage of Omaha” for his savvy investment tactics. He admitted that he was paying a high price for PCC, “In terms of price-earnings multiple going in, this is right there at the top.”
Buffett also said that he thought the company, whose share price is down 30 per cent over the past year, is under-priced by the equity markets. Following this large acquisition, Buffett said he would probably be buying a few smaller companies in the next six months and was in negotiations.
The deal is Berkshire’s largest acquisition ever and the latest of several mega acquisitions this year. Precision’s stock price zoomed more than 19 percent in premarket trading Monday after the announcement by Buffet. The deal is subject to approval by PCC holders of the outstanding shares and by regulators, and is expected to be completed in the first quarter of 2016.
“For good reasons, it is the supplier of choice for the world’s aerospace industry, one of the largest sources of American exports,” he said.
The deal will surely have a positive impact on our valuation for Hathaway Berkshire, which did not use any stock or debt to fund the deal and has been earning almost nothing on its $60 billion-plus cash stock.
“Berkshire’s Board of Directors is proud that PCC will be joining Berkshire,” said Warren Buffet. “We’re going to be in this business for 100 years, so it doesn’t really make any difference what oil and gas does in the next year,” he added.
Berkshire Hathaway’s previous largest deal was the 77-percent stake purchasing of the Burlington Northern Railroad for $26 billion in 2009.