All-cash deal for forging / manufacturing group is a long-term bet on civil aerospace sector
- Sustained market strength
- Berkshire’s largest acquisition
- Aerospace structural parts, hot section components
Berkshire Hathaway Inc., the multinational holding company controlled by celebrity investor Warren Buffet, has acquired Precision Castparts Corp. in an estimated $32-billion all-cash deal that reportedly will be the largest purchase to-date for the conglomerate. Accounting for the debt incurred by the buyer, the purchase is valued at $37.2 billion.
Buffet reportedly claimed this purchase would be the final, major acquisition for Berkshire for the foreseeable future, though smaller deals may be possible.
Buying PCC gives Berkshire Hathaway a solid presence in the civilian aerospace manufacturing sector, one with a diverse range of capabilities and a scale of production that make it comparatively free from new competitors or emerging new technologies. Jet builders Airbus and Boeing, along with smaller producers like Bombardier, Embraer, and Mitsubishi, and their suppliers like GE Aviation, Rolls-Royce, and Pratt & Whitney, are managing thousands of orders to deliver new aircraft over the next decade.
"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," Buffett offered in a release.
Berkshire already holds a 3% share in PCC, making it one of the largest stakeholders of the Portland-based manufacturing group, but it agreed to pay $235/share for a controlling interest.
Directors of PCC and Berkshire have already endorsed the acquisition. Shareholder approval and regulatory clearance are still pending, but the deal is anticipated to close in Q1 2016.
Precision Castparts will become an operating unit of Berkshire. No changes in its management or organization have been indicated.
Portland-based PCC produces complex metal components for aerospace and energy markets, with three divisions that focus on forgings, investment castings, and fasteners and airframes. From 2010 through 2013, the company conducted a series of acquisitions that expanded its position in the aerospace materials and components supply chain — capped by its $2.9-billion purchase of the integrated titanium metal producer, Timet.
After a pause of several quarters, Precision Castparts returned to the acquisition mode last month with deals to buy Composites Horizons LLC, a manufacturer of high-temperature carbon and ceramic composite components, including ceramic matrix composites, used in aerospace engines; and Noranco, a producer of machined and fabricated parts for aerospace engine, landing gears, and airframes.
PCC’s Forging business unit produces complex forged parts in nickel-based alloys, titanium, and steel alloys for aerospace, industrial gas turbines, and general industrial markets. It also produces extruded, seamless pipe for energy markets. Its operations include Wyman-Gordon (forged aerospace and IGT turbine parts), PCC Energy Group (pipe, fittings, forgings, tubing, cladding, sheet, plate, wire, rod, and solid bar products), Timet (primary titanium ingots and billets), and Special Metals Corp. (specialty nickel alloys.)
Other business units manufacture investment cast aerospace turbine parts, aerospace structural parts, airframe parts, and fasteners for aircraft structures, energy, and industrial power segments.