For this acquisition, industry analysts pointed out that from the higher level, the deal will prompt Berkshire in heavy industry layout in the next city, and reduce the company’s dependence on insurance and stock, after both Buffett in the past 50 years investment career, once played, the engine of growth in the role. fabricated assemblies OEM Manufacturer
Howe spends $37.2 billion on high-end manufacturing
Berkshire now owns more than 80 companies, despite spending $7.8 billion on 31 acquisitions last year. But Mr. Buffett’s massive merger and acquisition deal, dubbed “the Elephant,” did not take place in 2014, adding to investor expectations of Buffett’s next hunt. fabricated assemblies OEM Manufacturer
Now, the elephant has finally appeared again.
Buffett’s favorite precision parts company, which manufactures equipment for aerospace and industrial companies, is a “magical” company.
Data show that precision parts was founded in 1949, headquartered in Portland, Oregon, USA, is a precision metal parts manufacturing company, its products in aerospace industry and automotive industry and other industries. The main products include: space jet engine, aircraft structure control, landing gear, passenger and cargo door, engine cover and other fuselage structural parts. The company is Boeing, Rolls-Royce, Airbus, Bombardier, Cessna, Goodrich and other designated parts manufacturers.
The company, which employs 30,000 people, made the Forbes 500 list in 2009 and now ranks ninth in defense aviation.
In the last fiscal year, precision parts made $10 billion in sales. Last month, precision parts forecast. Sales in the company’s latest fiscal year (ended March this year) will rise from $10 billion to $10.4 billion, with an operating profit margin of about 27. Last year, 70% of the company’s sales came from aerospace. Another 17% came from the energy market. fabricated assemblies OEM Manufacturer
Bargain buying
Buffett said in a statement that the company is the world aviation industry’s top supplier and one of the largest sources of U.S. exports, and has enjoyed precision parts companies for a long time.
In fact, Berkshire is not seeking a stake in precision parts for the first time. Buffett acquired a stake in precision parts as early as 2012, according to data compiled by Bloomberg. Berkshire held a 3.1% stake in Precision parts as of March 31st, worth about $814 million at Friday’s close.
Revenue for the first quarter of 2015 was $two billion four hundred and twelve million, down 4.59m from a year earlier and net profit of $399 million, down 17.39 percent from the same period last year, according to financial data.
The company’s share price has fallen 20 percent this year, driven by falling pipeline demand from energy companies. As of Friday’s close, market value closed at about $26.7 billion, or $193.88.
But analysts point out that, despite poor performance and stock price performance for precision parts, the industry has a high threshold and the company has partnerships with leading industrial giants. So the position of the industry is hard to shake. Berkshire’s acquisition of precision parts or Buffett’s long-term bullish on aviation manufacturing and power generation. On the other hand, the logic of Buffett’s past investment. Buffett prefers companies with a long-term competitive edge and a moat as the underlying investment. Determined to buy when precision parts are low in profit, Buffett should be attracted to the company’s diverse technology and low debt. Good liquidity and expected earnings growth and other advantages. fabricated assemblies OEM Manufacturer
Refresh a single investment record
The acquisition of precision parts also sets a single investment record for Berkshire Hathaway.
Berkshire Hathaway announced on Monday that it would buy precision parts for $235 a share, a 21% premium to Friday’s closing price of $193. 88. The total value of the deal, including debt, was about $37.2 billion.
Buffett spent $37.2 billion on the deal, according to the Wall Street Journal. The price represents a substantial premium to the $26.7 billion market value deal that precision parts companies closed on Friday.
Precision parts will retain the company’s name and remain headquartered in Portland. Berkshire expects the deal to close on in the first quarter of 2016.
Restructuring Berkshire to create a giant industrial group
Industry analysts said Buffett’s decision to buy precision parts at this time was a far-reaching move to restructure Berkshire’s business system and transform it into an industrial group.
Berkshire’s earnings for the second quarter fell by $37% to $4.01 billion a year, or $2, 442 per share, according to the company’s second-quarter results. That was down from $6.4 billion and $3,889 a share in the same period last year. In addition, after deducting investment income, it earned just $2,667 per share, well below market expectations of $3,038 per share.
Over the past 50 years, Buffett has built Berkshire into a manufacturing, retail, electricity and rail conglomerate that can deliver steady cash flows. But the company’s profitability has been heavily affected by investment and insurance underwriting.
Profits on investments and derivatives were just $123 million in the quarter, according to earnings. That’s 94 cents less than in the same period last year. GEICO, once seen as “good luck” by Buffett, is now a weakness because of the increased frequency and cost of claims. The company’s contribution plummeted from $393 million to $53 million, resulting in a $38 million underwriting loss for the insurance business in the second quarter, as well as fluctuations in the exchange rate of the Australian dollar and other foreign currencies. The reinsurance business expanded to $411 million from a $9 million loss in the same period last year, adding to pressure on Berkshire. fabricated assemblies OEM Manufacturer
Enter the era of industrial operation
To avoid being dragged down by falling investment yields and underwriting losses in the insurance business, it is necessary to invest more in the non-insurance business.
With precision parts, Berkshire will add $10 billion a year to revenues and 30,000 new employees, up 10 percent from its current level.
On a higher level, analysts in the industry have pointed out, the deal will encourage Berkshire to reposition itself in heavy industry and reduce its reliance on insurance and stock selections. The latter two have once played the role of growth engine in Buffett’s investment career over the past 50 years.
Today’s Berkshire Hathaway holds such behemoths as BNSFs (Burlington North Santa Fe Railway) and BHEH (Berkshire Hathaway Energy). It is no longer the 1990s company famous for investing in Buffalo News and Shoe making, and for its ability to pick shares.
In fact, Berkshire was thought of as a mutual fund firm because of its fondness for equity investments. “that day is over,” said George Washington University professor. “this is the real age of industrial operations,” says Lawrence Cunningham, author of Berkshire in the Post-Buffett era.
Obviously Warren Buffett, 84, is not too old. In the big waves in Shang Hai, he showed the world what “one profit” and “turning stone into gold” mean, and now. Buffett is clearly on the verge of “getting worse and braver.” under pressure from a 30% drop in second-quarter profits, Buffett has not stopped expanding, but has made another big purchase to restructure his business to transform him into an industrial group.
In recent years, Buffett has emphasised advances outside the insurance business, with mergers and acquisitions in power utilities, manufacturers, retailers and railways.
Berkshire’s top five non-insurers posted a record pre-tax net profit of $12.4 billion in 2014, up $1.6 billion from 2013. 28.1 billion of Berkshire’s total pre-tax profit is close to half.
These include Berkshire Energy (formerly MidAmerican Energy) and BNSFs (Burlington North Santa Fe Railways). IMC (Israel Iska Metal processing Company). Lubrizolol (Lubrizolol) and Marmon (Marmont Holdings), which provides engineering wires, cables and motor vehicle parts.
The above “five King Kong” by Buffett through mergers and acquisitions, Buffett’s acquisition time is 1999, 2009, 2006, 2006, #date#time. Overall, Berkshire’s profits have increased year by year.
With precision parts in the bag, the company’s “six King Kong” territory loom, will further drive Berkshire’s strategy to transform into an industrial group.
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