Warren Buffett buys aerospace firm for $37B

August 11 00:53 2015

Billionaire investor Warren Buffett’s Berkshire Hathaway reached a deal to acquire aerospace supplier Precision Castparts in a deal valued at $37.2 billion, including the assumption of debt. It’s the largest deal ever for Nebraska native Buffett, who has long emphasized buying low, acquiring only things that you understand and investing for the long run, thus earning him the nickname “Oracle of Omaha.”AP BUFETT LUNCH A F FILE USA NE

Berkshire (BRK.A, BRK.B) said Monday that it would pay $235 per share in cash for all of Portland, Ore.-based Precision Castparts’ (PCP) shares. That represents a 21% premium on the stock’s Friday closing price of $193.88. The companies expect the deal to close in the first quarter of 2016. A majority of Precision Castparts shareholders must approve the deal.

Precision Castparts will maintain its headquarters and brand. The company has about 29,350 employees at 157 manufacturing facilities. It derives about 72% of its revenue from aerospace business, with 15% coming from the energy industry and 13% coming from general industrial customers and other industries. Precision Castparts had $10 billion in revenue in its 2015 fiscal year with $1.5 billion in net income from continuing operations.

The global manufacturer makes castings, forged components, aerostructures and fasteners for the aerospace market. It also produces pipe and fittings for the power business and many other parts. The company’s ties to the slumping energy market undermined its stock in recent months. PCP shares were down 20% for the year through Friday. Shanahan, the Edward Jones analyst, said he expects Buffett to deploy his classic hands-off management strategy with Precision Castparts.