US investment guru Warren Buffett's Berkshire Hathaway is buying Precision Castparts, a leading supplier to the aerospace industry, for $37.2 billion, the largest acquisition in the conglomerate's 50-year history.
Berkshire Hathaway will pay $235 per share in cash for all of PCC's outstanding shares, a 21 percent premium on PCC's closing price of $193.88 Friday, the companies said in a joint statement Monday.
Including Precision's debt, the deal is valued at about $37.2 billion, eclipsing Berkshire's 2010 acquisition of rail operator Burlington Northern Santa Fe in a cash-and-debt deal valued at $36.5 billion.
Precision Castparts will keep its name and its headquarters in Portland, Oregon, as a wholly owned subsidiary of Buffett's holding company, which currently owns about 3.0 percent of its stock.
The deal is subject to approval by PCC holders of the outstanding shares and by regulators, and is expected to be completed in the first quarter of 2016.
"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," Buffett, Berkshire's chairman and chief executive, said in a statement.
Precision Castparts manufactures complex metal components and products for the aerospace industry, including aircraft makers Boeing and Airbus, and also products for chemical processing and the oil and gas industry.
It had more than $10 billion in revenue in its fiscal 2015 year that ended in March, with net profit of $1.53 billion. Aerospace sales rose six percent from 2013, to $6.96 billion, accounting for 70 percent of sales.
The Berkshire bid comes as the company takes a hit from falling energy prices, with crude oil down about 50 percent since mid-2014.
In the fiscal 2016 first quarter ended June 28, net sales fell 4.0 percent from a year ago to $2.4 billion and net income per share shed 13 percent, Precision reported in late July.
The solid performance of Berkshire has made Buffett, 84, a legend, earning him the moniker the "Sage of Omaha" for his investment savvy.
His Buffett Partnership took control of Berkshire Hathaway, at the time a textile manufacturer, in May 1965.
Now the sprawling Berkshire conglomerate, based in Omaha, Nebraska, has a large number of majority and minority stakes in everything from small jewelry and furniture retailers to insurance giants Geico and General Re, chemicals group Lubrizol, Coca-Cola, IBM, American Express, Wells Fargo Bank and dozens of other companies.
The company's long-term gains have made Buffet the world's third wealthiest person, with net worth of $72.7 billion, according to Forbes.
- No 'elephant' in sight -
Buffett suggested the deal would be Berkshire's biggest for at least a year, although smaller deals were likely in the next six months.
"This takes us out of the market for an elephant," Buffett said in an interview on CNBC television.
"We'll be left with over $40 billion probably of cash when we get all through (with PCC)," he said. "But I like to have a lot of cash at all times. This means we have to reload over the next 12 months or so."
Berkshire ended its fiscal second quarter on June 30 with $66.6 billion in cash.
Precision's businesses in energy-production equipment were also a lure, the investment star said, amid a 50 percent drop in oil prices since mid-2014.
"When you get a chance to buy a wonderful company, there is usually some reason why you are getting that chance and perhaps a slump in oil and gas helps us in this case," Buffett told CNBC.
Shares of PCC soared 19.1 percent to close at $230.92 on the New York Stock Exchange.
Both Berkshire shares ended essentially flat with small losses. Berkshire A shares, the priciest on US markets, closed at $215,300, and Berkshire B shares finished at $143.42.