Buffett pulls trigger on Lubrizol deal

Berkshire Hathaway is purchasing Lubrizol
for $9 billion in cash in one of largest deals ever for Warren E. Buffett.

Berkshire will pay $135 a share for
Lubrizol, a specialty chemical maker based in Wickliffe, Ohio.

Berkshire Hathaway is sitting on
more than $38 billion in cash, and in his latest investment letter, Mr. Buffett
indicated that he was on the hunt for “major acquisitions.”

“We’re prepared,” he wrote. “Our
elephant gun has been reloaded, and my trigger finger is itchy.”

Lubrizol fits much of Mr. Buffett’s
deal-making criteria.

 It is a large company, with earnings of $732
million in 2010. Those earnings are relatively consistent, too.

The product is too easy to
understand: Lubrizol makes goods for the global transportation, industrial and
consumer markets, including fuel additives for gasoline and diesel.

The management team has been in
place for a while, too — another tenet of Mr. Buffett’s investment philosophy.

Lubizol’s chief executive, James Hambrick,
joined the company in the 1970s while still in school, and was named to the top
job in 2004.

That Mr. Buffett is using cash to
buy Lubrizol may indicate that he thinks Berkshire is undervalued.

Lubrizol is Mr. Buffett’s second
biggest acquisition in the last five years after Burlington Northern.

And since 1995, only
the $17.8 billion acquisition of General Re in 1998 and the $9.5 billion deal
for MidAmerican Energy Holdings also top Monday’s offer, according to Capital
IQ.

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