Precision Castparts Corp (PCP) to be Acquired by Berkshire Hathaway for $37.2B

Shares of Precision Castparts Corporation (PCP) were trading up +36.87 or +19.02 percent to $230.75 per share in this morning's premarket after news early this morning that Berkshire Hathaway (BRK-A) had agreed to buy the company in a deal worth $37.2 billion. Precision Castparts Corp. stock closed at $193.88 per share, up +0.07 or +0.04 percent in Friday's regular trading session.

Portland, Oregon based Precision Castparts Corporation was founded in 1953 as a metal fabrication company.
The company is a major manufacturer of airfoil castings, investment castings and forged components for the defense and aerospace industries. The company also makes equipment for power stations and the oil and gas industry. Precision Castparts is one of two Fortune 500 companies in Oregon and had net income of $1.7 billion on revenue of $9.6 billion in 2014. Precision Castparts subsidiaries include Titanium Metals Corporation, Special Metals Corporation and Wyman-Gordon.

Omaha, Nebraska based Berkshire Hathaway Inc. is a holding company for a multinational conglomerate. The companies wholly owned by Berkshire include Dairy Queen, Fruit of the Loom, Helzberg Diamonds, NetJets, FlightSafety International, GEICO, Lubrizol and BNSF. The company also has significant holdings in Kraft Heinz Company (KHC), Mars, Inc. and minority holdings in the Coca-Cola Co. (KO), IBM (IBM), Wells Fargo (WFC) and American Express (AXP).

Under the terms of the agreement, Berkshire will pay $235 for all outstanding shares of Precision Castparts, which represents a +21 percent premium to the stock's closing price on Friday. The deal includes all of Precision Castparts outstanding net debt.

Mark Donegan, Precision Castparts' Chairman and Chief Executive Officer said in a press release that, "We are very pleased to be joining forces with Berkshire Hathaway. We see a unique alignment between Warren's management and investment philosophy and how we manage PCC for the long-term. We believe that as part of Berkshire Hathaway, PCC will be exceptionally well-positioned to support our customers' needs into the future. 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 Chairman and Chief Executive Officer, Warren Buffet 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. Berkshire's Board of Directors is proud that PCC will be joining Berkshire".

Precision Castparts will become a unit of Berkshire but continue to do business globally under its name and retain its headquarters in Portland, Oregon. The transaction is subject to approval by a majority of Precision's shareholders, as well as other customary closing conditions including clearance under the Hart-Scott-Rodino Act and certain foreign jurisdictions. The deal is expected to close by the first quarter of 2016.

Precision Castparts stock is already trading up +19 percent in this morning's premarket and just five points under the Berkshire bid price. Berkshire Hathaway stock for its part is down -132.76 or -0.06 percent to $215,330.00 per share in this morning's premarket, the stock closed down -187.24 or -0.09 percent on Friday.

Other News About PCP

Precision Castparts Corp. Expands Its Machining Capabilities With the Acquisition of Noranco

Company purchased the supplier of components for aero engines for $560 million last month.

Precision Castparts Corp. Earnings Q2*, 2015

Precision earned $399 million or 2.87 per share in its latest quarter.
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Published on Aug 10, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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