Warren Buffett's Berkshire Hathaway Inc. has agreed to pay $37.2 billion for Precision Castparts Corp. (PCC), which makes equipment for, among other things, power plants and oil and gas companies.
Berkshire agreed to pay $235/share and assume debt, 21% above the Friday closing price for the Portland, OR-based firm. The deal is one of Berkshire's largest to date. In 2014, about 70% of PCC's sales were to the aerospace industry, with 17% of its market directed to the energy industry. Customers include General Electric Co., Boeing Co. and Airbus Group SE.
"I've admired PCC's operation for a long time," Buffett said.
PCC uses advanced engineering technology to make metal industrial components for power plants and jet engines, as well as pipes for the oil and gas industry. It employs 30,000 people. In the last fiscal year, pretax operating income was $2.6 billion with revenue of $10 billion.
The latest transaction adds to Berkshire's arsenal of industrial companies. Lubrizol, which it acquired in 2011, last year bought two Weatherford International plc oilfield chemicals businesses based in Texas (see Shale Daily, Dec. 1, 2014). Berkshire also owns a shares of ExxonMobil Corp., National Oilwell Varco and ConocoPhillips, among others (see Daily GPI, Dec. 31, 2013; Nov. 15, 2013). It's also a major shareholder in oilsands giant Suncor Energy Inc.
In addition, Berkshire’s energy unit owns Kern River Gas Transmission and Northern Natural Gas, as well as PacifiCorp, which operates utilities serving 1.8 million customers in six western states. Berkshire's BNSF Railway Co. is moving crude oil across North America and testing natural gas-fueled locomotive engines (see Daily GPI, March 8, 2013). And it bought Nevada's NV Energy Inc. in 2013 (see Daily GPI, May 31, 2013).
All together, Berkshire has more than 34,000 MW of generating capacity that are owned or under contract -- with renewables accounting for about 25% of the capacity. Buffett last year said Berkshire planned to continue to buy more energy investments, including in renewables, "as far as the eye can see" (see Daily GPI, June 11, 2014).