Berkshire said Monday that it will pay $235 per share in cash for Precision Castparts’ outstanding stock. The deal is valued at about $37.2 billion, including debt.
One of Precision Castparts’ subsidiaries, McSwain Manufacturing, is located just south of Butler County near Interstate 275. McSwain manufactures and supplies precision machine parts and components for gas turbine, computer technology and aerospace industries.
Buffett searches for deals of this size to meaningfully improve profits at Berkshire and invest the company’s $66.6 billion cash it had on hand. The universe of big companies that fit Buffett’s criteria tend to be manufacturing or industrial firms.
And the 85-year-old Buffett wants to give Berkshire the strongest foundation possible for his investors and whoever eventually succeeds him.
“I think he’s setting things up for the future and he doesn’t want anything terribly risky,” said Andy Kilpatrick, the investor who wrote “Of Permanent Value: The Story of Warren Buffett.”
Precision Castparts, based in Portland, Oregon, has been hit hard by tumbling crude and natural gas prices, but it appears to have strong long-term prospects. Buffet told CNBC that he would have bought the company even if he knew that commodities were in the midst of a multiyear slump.
“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,” said Buffett, whose company already held 4.2 million shares or about 3 percent of Precision Castparts’ stock.
George Morgan, a finance professor at the University of Nebraska at Omaha and a former investment adviser, said Buffett’s field of possible investments is limited because of the size he is looking for today.
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