Warren Buffett buying Portland’s Precision Castparts

Precision Castparts will keep its name, continue to be based in Portland

Warren Buffett
FILE - In this May 5, 2014, file photo, Berkshire Hathaway Chairman and CEO Warren Buffett speaks during an interview with Liz Claman on the Fox Business Network in Omaha, Neb. Buffett’s Berkshire Hathaway is buying Precision Castparts Corp. for approximately $32.36 billion, the company announced, Monday, Aug. 10, 2015. (AP Photo/Nati Harnik, File)

OMAHA, Neb. (AP) — Warren Buffett’s Berkshire Hathaway is buying Precision Castparts Corp. for about $32.36 billion.

The announcement ended a weekend of speculation that a deal was in the works between the legendary investor and the maker of components for aircraft, power plants and other industrial uses.

Berkshire will pay $235 per share in cash for Precision Castparts’ outstanding stock. The deal is valued at about $37.2 billion, including debt.

The deal is not just the biggest deal in Oregon, but it’s also Berkshire Hathaway’s biggest deal.

Buffet’s no-nonsense, pragmatic approach is also the trademark of Berkshire. It’s a management style that Precision Castparts has used to build itself into Oregon’s second-largest company.

Precision Castparts will keep its name and continue to be based in Portland.

Inside Precision Castparts in Portland (KOIN, file)
Inside Precision Castparts in Portland (KOIN, file)

Berkshire Hathaway is known for being involved in large transactions, among them the combination of Kraft and Heinz. It owns various businesses, including insurance and railroad companies, utility, clothing, furniture, brick, carpet, jewelry and pilot training firms. Berkshire Hathaway also has major investments in such companies as Coca-Cola, IBM and Wells Fargo & Co.

Precision Castparts does a lot of business with the energy sector, and it’s taken a hit with oil prices now nearing a six-year low.

Buffett told CNBC that he would have bought the company even if he knew that energy prices were in the midst of a multiyear slump.

“We’re going to be in this business for 100 years, so it doesn’t really make any difference what oil and gas does in the next year,” Buffett said.

The boards of Precision Castparts and Berkshire Hathaway Inc. unanimously approved the transaction, which is expected to close in 2016’s first quarter.

Shares of Precision Castparts surged $38.37, or 19.8 percent, to $232.25 in Monday premarket trading.

‘Unique alignment’

Twenty-five years ago, University of Portland business professor Jon Down worked for Precision Castparts. He told KOIN 6 News the company has strong operations and efficiency-oriented management systems.

University of Portland professor Jon Down, August 10, 2015 (KOIN)
University of Portland professor Jon Down, August 10, 2015 (KOIN)

Because of that, the fact its stock dropped from well over $250 a share to below $200 earlier this year made it even more attractive to Buffet’s investment-driven company.

“There’s been some times when Precision Castparts stock, in hindsight, has been a screaming deal, and I think that’s kind of what Berkshire Hathaway is saying,” Down said. “There’s a lot of accountability and the flip side of that is that there’s also a lot of profit sharing, so when the company does well, the employees do well.

Buffett said he’s admired Precision Castparts for a long time.

The CEO of Precision Castparts said, in a statement, “We see a unique alignment between Warren’s management and investment philosophy and how we manage Precision Castparts for the long term.”

Down thinks the employees will see little change and that Berkshire Hathaway will continue to let the company operate independently.

The $37.2 billion price is $10 billion more than the company’s market value 3 days ago.

“It’s pretty amazing that it is such a big purchase and was such a quick thing,” Down said. “It is somewhat of a surprise deal and from a psychological point of view it’s a little bit sad, I think, losing another Fortune 500 company that’s headquartered here.”

KOIN 6 News reporter Tim Becker contributed to this report.

 

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