Warren Buffett Agreed To Buy Lubrizol Corp

Posted by Zotta Rendevouz

$ 9,000,000,000 Warren Buffett agreed to buy Lubrizol Corp. (LZ), the manufacturer of Wickliffe, Ohio, engine lubricants, is in Paris for his Berkshire Hathaway Inc. (BRK / A) in cars, trucks, rail freight and luxury jets.

Berkshire will pay $ 135 per share in cash, 28 percent above the closing price on March 11, Lubrizol, Warren Buffett's company, based in Omaha, Nebraska, said in a statement.

Buffett, 80, has transformed Berkshire over the last ten years to improve the shipping companies, and insurance, energy and consumer products units. His purchase $ 26500000000 Burlington Northern Santa Fe last year gave Berkshire's second-largest railroad in the United States. He bought a 9.9 per cent of the Chinese car maker BYD Co. in 2008 and 2003, added food distributor McLane Co..

"Lubrizol has lubricants, transport companies and between McLane and the railways, there is a lot of transport" in Berkshire, said Meyer Shields, an analyst with Baltimore-based Stifel Nicolaus & Co. "There will be a considerable amount application, such as rising fuel prices forcing companies to buy products that will improve the efficiency of transport, said Shields.

Berkshire fell $ 1,663 or 1.3 percent, to $ 126.337 at 10:24 am in New York Stock Exchange. The stock has gained about 2.5 percent over the past 12 months, trailing the 13 percent increase in the Standard & Poor's 500 Index. Lubrizol rose to $ 133.97.

Buffett, who has tens of thousands of people in the Berkshire annual meeting in Omaha each year, has called the issue of data collection in 2011, "Planes, Trains and Automobiles." The meeting is scheduled for April 30.

Showing off

"It gives NetJets, BNSF and BYD an opportunity to show," Buffett said in his letter, published on 26 February.

NetJets Inc., owned by Berkshire fractional jet unit, said on 02 March, a request was made less than 120 of Bombardier Inc., in anticipation of a surge in luxury travel. Buffett said Burlington prosper due to increased trade, the advantage of energy efficiency of trains "to the trucks and the inability of competitors to duplicate the network of the railway.

Buffett, chairman and CEO of Berkshire, has built his company over four decades of acquisitions and stock picks. The billionaire told shareholders in his annual letter last month that his elephant gun "has been replaced, and my trigger finger itching to recovery gains and investments maturing built Berkshire's cash position to $ 38.2 billion at year end.

Search Criteria

Lubrizol was one of about 40 companies came forward this month, Bloomberg News article explores the companies that might fit Buffett's criteria for acquisition. The company had a market capitalization between $ 4 billion and 40 billion U.S. dollars, the expenditure of capital accounts for at least 5 percent of their equity, return on equity exceeding 10 percent earnings growth over the past five years, which ranks the top 50 percent, and average price / earnings, which extend to which was below the median S & P 500

Lubrizol capital costs represent 15 percent of sales of property and earnings Return on equity was 34 percent last year. company's average price / earnings multiple of five years was 11.9, the data compiled by Bloomberg show. Lubrizol return on equity was the highest in the company's acquisition of specialty chemicals from Inspec Group Plc 1998, according to Bloomberg data.

"Burden of the introduction of the Capital"

"He has a burden to deploy capital," said Thomas Russo, partner at Gardner Russo & Gardner Berkshire investor. Lubrizol is a company that takes advantage of the market share and has the ability to grow abroad because of the industrialization of the world. "

Berkshire and Lubrizol said they expect the acquisition to be completed in the third quarter. Lubrizol will operate as a subsidiary of Berkshire and remain based in Wickliffe. Lubrizol had a turnover of 1.32 billion in the fourth quarter, adjusted earnings per share between $ 2.45, the company said last month.

Citigroup Inc. and Evergreen Core Partners Inc. acted as financial advisor to Lubrizol, while Jones Day was a lawyer. Munger, Tolles & Olson LLP served as legal counsel to Berkshire.