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Berkshire Hathaway investment conglomerate pays $235 a share in cash for maker of aircraft parts and energy production equipment

Warren Buffett, the octogenarian multibillionaire investor, has struck his biggest deal by agreeing to buy a US maker of aircraft components and industrial pipes for $37.2bn (£24bn) including debt.
Berkshire Hathaway, Buffett’s investment company, has agreed a deal that values the Portland, Oregon-based Precision Castparts at about $32.5bn excluding its net debt. The price of $235 a share in cash is 21% more than the company’s closing share price on Friday.

Precision Castparts makes nuts, bolts and other fasteners for aerospace companies such as Airbus and Boeing. It also makes pipes and fittings for power and industrial companies.
Berkshire Hathaway owns about 3% of the company, having started to build up a stake three years ago. Buffett’s decision to use a large part of Berkshire Hathaway’s $67bn cash reserves to buy the entire company is a bold bet on the future of manufacturing in the US.
Buffett said: “I’ve 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.”
In May, Buffett marked 50 years since he bought Berkshire Hathaway and turned what was a struggling textiles business into a $354bn conglomerate spanning insurance, confectionery and restaurants, with stakes in Coca-Cola, American Express and other US household names.
The latest purchase will extend Buffett’s recent push into the industrial sector, mainly in America. In the past decade, he has bought companies such as the US industrial components producer Marmon, Israeli toolmaker Iscar, and Lubrizol, the US chemicals company.
Buffett ranks those unglamorous companies among what he calls the “powerhouse five” – non-insurance businesses whose combined earnings are a cornerstone of Berkshire Hathaway’s financial performance.
BNSF, the US railway operator Berkshire Hathaway purchased in 2009, is also on the list. It paid $26bn for the 77% of BNSF it did not own in what Buffett said was a bet on America.
Precision Castparts has suffered from weaker demand in the energy sector due to the low oil price and last month reported quarterly profits below expectations. Revenue fell 4% to $2.4bn and operating profit dropped 16% to $619m. The near-30% fall in the company’s share price since the middle of last year may well have prompted Buffett and his investment managers, Todd Combs and Ted Weschler, to make a bid.
Known as the “sage of Omaha”, Buffett, 84, runs Berkshire Hathaway from a nondescript building in Omaha, the largest city in Nebraska. He is known for living frugally despite a fortune estimated at £67bn and has shunned stock market fads in favour of long-term investments since buying Berkshire Hathaway.
Mark Donegan, Precision Castparts’ chairman and chief executive, said: “We see a unique alignment between Warren’s management and investment philosophy and how we manage PCC for the long term. This transaction offers compelling and immediate value for our shareholders, and allows PCC’s employees to continue to operate in the same manner that has generated many years of exceptional service and performance to our customers.”
Berkshire Hathaway’s businesses include insurance companies such as the giant reinsurer General Re, Fruit of the Loom clothing and Dairy Queen, the fast-food chain. It has also bought and sold stakes in Wells Fargo, Goldman Sachs and Heinz, often spotting opportunities that other investors missed.
Buffett has said that Berkshire Hathaway’s size makes meaningful acquisitions increasingly difficult to come by and has described finding such deals as “elephant hunting”.
Buffett is the second richest person in the US and the fourth wealthiest in the world. He has traditionally vied with his friend Bill Gates, founder of Microsoft, and Carlos Slim, the Mexican telecoms mogul, for the top spot but was knocked down to number four last year by Amancio Ortega, founder of Zara, the fashion retailer.
Buffett is giving away almost all his fortune by donating to the Bill and Melinda Gates Foundation, set up by Gates to promote health and education and combat poverty. He donated $2.84bn to the foundation and other charities last month.
Not all Buffett’s bets pay off. He admitted in March that his “thumb-sucking” over selling his stake in Tesco cost Berkshire Hathaway $444m. Buffett, who advocates buying when others are fearful, increased his stake in Britain’s biggest retailer in 2012 despite a profit warning but then “dawdled” as the bad news mounted, he said in his annual letter to shareholders.