Warren Buffett pays $37B for aerospace company

By Barry Eitel

SAN FRANCISCO, United States 

Billionaire investor Warren Buffett announced Monday that his Berkshire Hathaway company has bought aerospace manufacturer Precision Castparts for $37.2 billion, the largest deal he has ever overseen.

Oregon-based Precision Castparts Corporation (PCC) was founded in 1953 and builds parts used in the aerospace and energy industries with a specialization in jet engine components. Included among PCC’s major clients are aircraft builder Boeing and the world’s largest defense contractor Lockheed Martin. 

The large buyout goes against Buffett’s usual acquisition strategy, which centers on buying low and investing over time. His Nebraska-based conglomerate, Berkshire Hathaway, has bought a diverse range of companies from insurer Geico to the Burlington Northern Santa Fe railroad to ice cream chain Dairy Queen. The $354 billion empire pulls in a huge amount of profit from its interests, with the company reporting a cash stockpile of nearly $67 billion in late June. 

"I’ve admired PCC’s operation for a long time," the 84-year-old Buffett said in a statement Monday. "For good reasons, it is the supplier of choice for the world’s aerospace industry, one of the largest sources of American exports."

This year has been an extraordinary period of mergers, with some $2.7 trillion deals already announced in 2015 according to The New York Times.

"We see a unique alignment between Warren’s management and investment philosophy and how we manage PCC for the long-term," said PCC CEO Mark Donegan, adding that "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 is paying $235 per share for PCC, a 21 percent premium on the stock’s $193.88 closing price Friday. Monday’s deal still has to undergo scrutiny from PCC’s shareholders and government regulators, but is expected to close in early 2016.