Why Warren Buffet Just Made His Biggest Acquisition Ever

(Los Angeles Times/TNS) -

Billionaire Warren Buffett, still making mega-deals at age 84, on Monday announced his biggest acquisition yet: the purchase of Precision Castparts Corp. for about $32 billion in cash.

Berkshire Hathaway Inc., Buffett’s diversified holding company based in Omaha, Neb., agreed to pay $235 a share for Precision Castparts, which makes parts and equipment for aircraft, power plants and other industrial uses.

Buffett is one of the nation’s richest people, with a net worth Forbes estimates at $66.5 billion, thanks to decades of canny stock-picking and corporate acquisitions, and his patient willingness to see those investments flourish.

His investing tenets are legendary: Buy stocks or companies and hold them for the long term, stick with management you know, buy value and avoid stocks in industries you don’t understand, such as certain technologies.

Precision Castparts fits into that thinking. Berkshire Hathaway already had been one of Precision Castparts’ largest shareholders, with a 3 percent stake, and Buffett said in a statement that he has “admired PCC’s operation for a long time.”

“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.

Buffett also told CNBC that even though Precision Castparts’ growth has been slowed by the latest drop in oil prices, “we’re going to be in this business for 100 years, so it really doesn’t make any difference what oil and gas does in the next year.”

Precision Castparts will keep its name and maintain its headquarters in Portland, Ore., the companies said.

The proposed acquisition, which remains subject to approval by Precision Castparts’ stockholders, also is the latest multi-billion-dollar deal in a series of giant mergers involving U.S. companies this year.

One was the recent merger of food giants Kraft Foods Group Inc. and H.J. Heinz Co. that Buffett helped engineer. Berkshire Hathaway and Brazilian private-equity firm 3G Capital Partners had teamed up to buy Heinz two years earlier.

Berkshire Hathaway’s other holdings include Geico Insurance, BNSF railroad, Benjamin Moore paints and See’s Candies, along with major stakes in Coca-Cola Co., American Express Co. and Wells Fargo & Co.

Precision Castparts’ stock soared after the deal was announced, closing Monday’s trading session up $37.04, or 19.1 percent, at $230.92 a share.