Warren Buffett, the billionaire investor and chairman of Berkshire Hathaway (BH) is in final talks to buy U.S. chemical firm Phillips Specialty Products Inc. (PSPI). BH intends to use its 19 million shares equalling about $1.4 billion U.S. it owns in Phillips 66 to secure the acquisition; Phillips 66 the parent company of PSPI. The exact number of shares will be determined by the price of the company’s stocks when the deal is finally sealed within the first half of next year.
In a statement released Monday, Buffett mentioned that “I have long been impressed by the strength of the Phillips 66 business portfolio.” This is not only due to the company’s high-quality business but also its strong financial performance, he added.
PSPI is a Houston-based company engaged in making polymers used to dilute crude oil in order to maximize its flow in pipelines. The company is now the leading player in this industry with its customers in more than 35 countries on six continents and processes more than 12 million barrels of hydrocarbon liquids per day.
Based on the plan presented, the chief executive of Berkshire Hathaway’s chemical unit Lubrizol Corp James Hambrick will strategically manage the business of PSPI. Lubrizol Corp, an Ohio-based firm, was bought by Warren Buffett’s Berkshire in 2011 for $9 billion U.S. According to Greg Garland, the chairman and CEO of Phillips 66, “Berkshire Hathaway made a strong offer for our high-performing flow improver business.”
Buffett’s BH has a propensity for buying companies; not only because it has enough cash at its disposal to do so, but also because this will help the parent company strategically navigate the circuitous and oftentimes perilous world of business better. Listed below are some of Berkshire Hathaway’s acquisitions for the year 2013.
In October, BH’s Marmon Group started a deal to buy a company engaged in the making of valves for drink dispensers and a merchandising business from UK engineering group IMI for $1.1 billion U.S. Also in October, BH’s MiTek Industries acquired Kova Solutions, a software company that allows housing firms the ability to monitor their operations. The company will enhance MiTek’s role of providing software for residential component manufacturers. Earlier, MiTek also acquired Benson Industries, a manufacturer of curtain wall systems.
NV Energy, a subsidiary of MidAmerican Energy, was acquired by BH in June for $23.75 U.S./share. When the buy-out is complete, MidAmerican will serve 8.4 million customers and have an asset of around $66 billion U.S.
In February, BH, in partnership with 3G Partners, acquired H.J. Heinz, the food company, for $23.2 billion U.S. This is considered as the largest acquisition in the food business. According to H.J. Heinz CEO William Johnson, the deal will add great value to H.J. Heinz shareholders as well as provide better opportunities for H.J. Heinz’s iconic brands in the future.
Warren Buffett is considered as the world’s greatest investor and he will not gamble on these acquisitions if he thinks these are losing propositions. Thus, with the final talks to buy a U.S. chemical firm, Buffett’s Berkshire Hathaway is in on another plan to increase its already bountiful income.
By Roberto I. Belda