Monday, March 14, 2011

Buffett Uses Elephant Gun, Buys Lubrizol for $ 9 Billion in Cash

Sure didn't take long to find out what Berkshire Hathaway (BRKa) would buy next.

Even with the 28% premium to Lubrizol's closing price on Friday, it looks like Buffett paid just over 12x the previous year's earnings for the company.

A good overview of Lubrizol from WSJ's Deal Journal:

Nearly three-quarters of Lubrizol's revenue comes from its "additives" segment, which churns out goo to keep humming engine oil and fluids for passenger cars, big diesel engines, power tools, hydraulics and other working machine parts.

While certainly a large purchase, Lubrizol is relatively small compared to Berkshire Hathaway:

Lubrizol pulled in $5.4 billion in revenue for 2010, compared to Berkshire’s more than $136 billion in revenue over the same time period. Lubrizol had about 6,900 workers at the end of last year, and facilities in 27 countries around the world, many of them laboratories where it cooks up new work. Berkshire employed about 260,000 people.

Some other articles on the deal:
Buffett had the following to say in the Berkshire Hathaway News Release:

"Lubrizol is exactly the sort of company with which we love to partner – the global leader in several market applications run by a talented CEO, James Hambrick," said Warren Buffett, Berkshire Hathaway chief executive officer. "Our only instruction to James – just keep doing for us what you have done so successfully for your shareholders."

I guess now we know just how itchy that trigger finger was.

Adam

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