Billionaire Warren Buffett's Berkshire Hathaway is to pay $4.5 billion (€3.1 billion) for 60 per cent of Marmon Holdings, a family-owned group based in Chicago.
The move sees iconic investor Mr Buffett adding another family-run company that has prospered without shareholder demands for short-term profits.
Chicago's Pritzker family, which controls Global Hyatt, built Marmon into a group with $7 billion in annual sales and 125 units including operations that serve the railway and energy industries. Operating income more than tripled from 2002 to 2007, Omaha, Nebraska-based Berkshire said in a statement.
Marmon has "businesses that are fairly niche-oriented where they have dominant positions established over time," said Thomas Russo, of Berkshire shareholder, Gardner Russo Gardner in Lancaster, Pennsylvania and counts Berkshire as its largest holding. "They have a history under the Pritzkers of being liberated from the quarterly earnings game."
Mr Buffett (77) built Berkshire over four decades, buying out- of-favour stocks and manufacturers to transform a failing textile maker into a $210 billion holding company. His biggest investment last year was the $4 billion purchase of Iscar Metalworking Cos from Israel's Wertheimer family.
Berkshire, which had more than $45 billion in cash as of September 30th, is as prepared as it has "ever been" to buy a "big business outright", Buffett told shareholders at an annual meeting in May. He has said he is prepared to spend as much as $60 billion on the right company. The Marmon acquisition is set to be completed in the first quarter of 2008, with Berkshire acquiring the remainder of the company by 2014 at a cost based on future earnings.
Marmon employs 21,500 people, mostly in North America, the UK, Europe and China. Its businesses include a dozen companies that manufacture wire and cable products for energy and construction use. The group has a transportation-services operation that produces railroad cars and leases tank containers in China. Operating income was $794 million last year.
The businesses "are not prone to widespread technical obsolescence," Mr Russo said. "They would have a relationship with their suppliers and customers that give them an ongoing partnership." The takeover is the largest announced by Mr Buffett since 2005. - (Bloomberg)
