US stocks climb as oil rebounds; Precision Castparts jumps

Warren Buffett’s Berkshire Hathaway has made its biggest ever investment and is betting on the success of American aircraft and energy parts manufacturer Precision Castparts in a deal worth $37.2 billion.

The large buyout goes against Buffett’s usual acquisition strategy, which centers on buying low and investing over time.

Omaha, the largest city in the Midwestern state of Nebraska, is Buffett’s birthplace and home and where his holding company is based.

Precision Castparts will maintain its headquarters in Portland, Oregon, the companies said in a joint statement.

The purchase extends Berkshire’s transformation from a company largely dependent on insurance businesses into one resembling the broader US economy, including a railroad, several industrial companies, utilities, a vehicle dealership and consumer goods businesses. Including debt, the deal is valued at about $37.2 billion.

Warren Buffett’s Berkshire Hathaway Inc.is buying aerospace supplier Precision Castparts… The transaction for Precision Castparts, news of which emerged over the weekend, is subject to shareholder and regulatory approval, and is expected to close in the first quarter of 2016. This year, 3G and Berkshire struck a separate deal to combine Heinz with Kraft, the maker of macaroni and cheese, Oscar Mayer meats, Planters nuts and Jell-O. It also manufactures equipment for oil and gas industries.

For Berkshire Hathaway, this is another big acquisition that will put cash to work and change the company’s operations for the future.

In its last full trading year, to March, revenues rose to US$10bn but net income dropped from US$1.8bn to US$1.5bn.

In 2009, Berkshire agreed to pay $26 billion for the portion of Burlington Northern – now called BNSF Railway – it didn’t already own.

Berkshire said PCC will remain headquartered in Portland, Ore. and operate as a wholly-owned subsidiary, continuing to do business around the world under the PCC brand name.

BRK.A closed Friday’s trading at $215,462.77, down $187.23 or 0.09 percent. As of June 30, the company had $66.6 billion in cash on hand. If the energy sector is excluded, profits rose 7.7 percent, according to S&P Capital IQ data. The company has 157 plants worldwide and has more than 29,000 employees. Shields said Precision Castparts stock had traded as high as $280 in recent years. The price offered is at least 21 percent higher than the last closing price of Precision Castparts.