Buffett to buy Precision Castparts

OMAHA, Neb. - Warren Buffett is making the biggest bet of his long investment career, a $32.36 billion buyout of Precision Castparts in a deal that will continue to reshape his Berkshire Hathaway conglomerate.

The acquisition of the aerospace and industrial company would top Buffett's $26.7 billion deal for BNSF railroad in 2010. It also follows several huge deals outside the core insurance companies with which Buffett built his investment empire, including manufacturers, railroads, utilities, and food companies.

Berkshire said Monday that it will pay $235 a share in cash for Precision Castparts' outstanding stock. The deal is valued at about $37.2 billion, including debt.

Precision Castparts has a factory in Abington Township that employs about 900, including 60 temporary workers. The facility, whose products include bolts that hold wings, engines, and landing gear on jets, was part of Jenkintown-based SPS Technologies Inc., which Precision Castparts bought in 2004 for $694 million.

Buffett searches for deals of this size to meaningfully improve profits at Berkshire and invest the $66.6 billion cash the company had on hand. The universe of big companies that fit Buffett's criteria tend to be manufacturing or industrial firms.

The 85-year-old Buffett wants to give Berkshire the strongest foundation possible for his investors and whoever eventually succeeds him.

"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, based in Portland, Ore., has been hit hard by tumbling crude and natural gas prices, but it appears to have strong long-term prospects. Precision will keep its name and remain in Portland.

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

Buffet told CNBC that he would have bought the company even if he knew that commodities 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," said Buffett, whose company already held 4.2 million shares, about 3 percent of Precision Castparts' stock.

George Morgan, a finance professor at the University of Nebraska at Omaha and a former investment adviser, said Buffett's field of possible investments is limited because of the size he is looking for.

Author and investor Jeff Matthews, who wrote Warren Buffett's Successor: Who It Is and Why It Matters, said he did not think Berkshire was getting a good price on Precision Castparts, so was unsure it will be good for shareholders, especially because Precision's business is tied to the airline industry.

"I'm not crazy about buying a cyclical business like this with the stock market at an all-time high," said Matthews, who also holds Berkshire stock.