NEW YORK: Billionaire Warren Buffett's Berkshire Hathaway Inc struck a deal to buy lubricants maker Lubrizol Corp for $9 billion, betting on a global economic recovery. The deal is Berkshire's biggest since it bought Burlington Northern Santa Fe for more than $26 billion in late 2009.
It extends the trend of Berkshire expanding in basic industries, which includes Buffett's recent deals for Marmon Holdings and Israel's Iscar Metalworking. Berkshire, which had amassed about $38 billion of cash by the end of last year, will acquire Lubrizol for $135 per share, about a 28% premium to its closing price on Friday. Berkshire will also assume about $700 million of Lubrizol's
Lubrizol's shares soared more than 27% to $133.95 in late-morning trading. Shares of NewMarket , one of the chemical company's closest competitors, were up 12%. Lubrizol makes lubricants for engines, especially large trucks, buses and boats. Demand for the company's products should
In February, the company posted a strong quarterly profit and issued a bullish forecast for 2011, signaling that demand for lubricants was improving along with the economy. About 65% of the company's sales were from outside North America last year. "Lubrizol is exactly the sort of company with which we love to partner ? the global leader in several market
The company will continue to be led by its current management team under James Hambrick , the companies said. Just two weeks ago, Buffett told Berkshire shareholders that he was searching for new acquisitions. "Our elephant gun has been reloaded, and my trigger finger is itchy," the 80-year-old investor wrote in his annual letter. Thomas Russo , who helps invest more than $3 billion at Gardner Russo & Gardner, said he believes the investment is positioned to take advantage of increasing demand for Lubrizol's products as emerging economies around the world industrialise further.
Some 11% of Gardner Russo & Gardner holdings are invested in Berkshire shares. "It's certainly a full price ? especially if you think back what the opportunity could have been had they bought at the bottom of 2008 or 2009's market sell-off ," Russo said. "But it's all about the forward looking returns and I suspect that the rest of the
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