Warren Buffett's Berkshire Hathaway Inc. is reportedly closing on its largest acquisition ever with a deal to buy Precision Castparts Corp. soon to be signed.
Citing anonymous sources, the Wall Street Journal and Reuters separately reported Berkshire is on its way to purchase Precision Castparts, which makes aircraft components and energy-production equipment, by next week for more than $30 billion.
Both reports said Berkshire is currently the single largest shareholder of Precision Casparts, with a 3 percent stake worth $882 million as of March 31, according to securities filings.
The Wall Street Journal noted that if Berkshire completes the acquisition of Precision Casparts, it will trump the takeovers of Burlington Northern Santa Fe for $26 billion in 2010 and this year's $23 billion purchase of ketchup maker H.J. Heinz Co., which was done in partnership with Brazilian investment firm 3G Capital Partners.
The report added acquisitions are key to growing the earnings of Berkshire since the conglomerate already generates annual revenues of $200 billion. In Precision Castparts, Berkshire will get a company that gets half of its annual $10 billion sales from the big players of the aerospace industry. It netted profits of $1.53 billion in fiscal year 2014 ending March 29.
The newspaper added that Berkshire's acquisition of Precision Castparts comes amid the ongoing consolidation in the aerospace industry as the demand for aircrafts rise with the sustained growth in airtravel. With aircraft makers ramping up production, parts makers are also exploring ways to improve efficiency to keep up.
Reuters, meanwhile, noted that the acquisition further widens Berkshire's portfolio of industrial companies that include parts maker Marmon, Israeli toolmaker Iscar, and specialty chemicals company Lubrizol. It added that these companies are among biggest contributors to Berkshire outside the insurance business.
The acquisition will eat into Berkshire's cash stockpile, but still leave the company over $20 billion, Reuters said.
