US Stocks Climb in Early Trading; Precision Castparts Jumps

Precision Castparts’ shares jumped as much as 19.3 per cent to US$231.25, while Berkshire Class B shares fell 1.4 per cent to US$141.60.

That shift doesn’t necessarily mean Buffett is changing his thinking, Cunningham said, but it shows that as Berkshire and its subsidiaries have grown, he’s had opportunities to negotiate bigger deals.

NEW YORK (AP) — Energy companies are leading a rebound in U.S. stock trading as the price of oil turns higher.

Shareholder rights attorneys at Robbins Arroyo LLP are investigating the proposed acquisition of Precision Castparts Corp (NYSE: PCP) by Berkshire Hathaway Inc.

Former United States Securities and Exchange Commission attorney Willie Briscoe and the securities litigation firm of Powers Taylor LLP are investigating potential claims against the Board of Directors of Precision Castparts Corp.

The acquisition marks Mr Buffett’s return to what he defines as “elephant” deals, as the latest takeover eclipses the $26 billion Berkshire paid in 2009 to buy a controlling stake in Burlington Northern Santa Fe, operator of the US’s second-biggest rail network.

Precision Castparts would join several industrial companies that Buffett has bought in the last decade, including toolmaker Iscar, parts maker Marmon, and chemicals company Lubrizol.

With a company that size, Buffett needs to strike big deals to meaningfully improve profits at Berkshire.

“I think he’s setting things up for the future and he doesn’t want anything terribly risky”, said Andy Kilpatrick, the investor who wrote “Of Permanent Value: The Story of Warren Buffett”.

Precision Castparts will keep its name and will remain in Portland. When considering typical premiums, the industrial company’s price tag could cross $30 billion. The transaction, expected to close early next year, must still be approved by PCC shareholders and receive the necessary regulatory approvals.

Precision Castparts amassed $10 billion in revenue during its 2015 fiscal year, with $1.5 billion in net income from continuing operations. Berkshire Hathaway acquired Lubrizol for $9 billion in 2011. “We’re certainly paying a very good price”, said Buffett.

Precision Castparts, meanwhile, has grown rapidly through a series of acquisitions, but its stock price has been weighed down by a series of production problems, destocking by one of its largest customers and the exposure of its pipeline business to the oil-and-gas sector.

The deal takes Mr. Buffett back to his fundamentals.

Considering the industry segments Precision Castparts is involved in, it is apparent; the company makes niche products that have few competitors, if any.

Credit Suisse was financial adviser to Precision Castparts, while Cravath, Swaine & Moore LLP and Stoel Rives LLP were its legal advisers.