No. of Recommendations: 1
Berkshire Hathaway Buys Homebuilder in CEO Abel’s First Takeover
Berkshire Hathaway is sitting on nearly $400 billion in cash–and it looks like the conglomerate’s new CEO Greg Abel is keen to start spending it. Berkshire said on Sunday that it had agreed to buy a leading homebuilder, the first acquisition it has announced since Abel replaced Warren Buffett at the helm.
• Berkshire agreed to buy Taylor Morrison Home for $8.5 billion in cash, including assumed debt. Berkshire is paying $72.50 a share for the Arizona-based company, a 24% premium to the stock’s closing price Friday of $58.50.
• The deal signals a willingness by Abel to make purchases using the $400 billion cash pile, and it also adheres to Berkshire’s historic price discipline in buying stocks or companies. At Friday’s close, Taylor Morrison stock was near its 52-week low.
• “Joining Berkshire Hathaway is a once-in-a-lifetime opportunity to propel Taylor Morrison into its next, and most exciting, chapter, supported by Berkshire’s unmatched capital strength and long-term investment philosophy,” Taylor Morrison’s CEO Sheryl Palmer said.
• Barron’s wrote earlier this year that a homebuilder would be a natural purchase for Berkshire. The conglomerate appears to be taking advantage of the weakness in home-building stocks to get a well-regarded Sunbelt company for a discounted price.
What’s Next: The transaction, while not large, likely will be well-received by Berkshire investors. Berkshire’s Class A stock, which ended Friday at $710,900, is down 6% this year and is more than 15 percentage points behind the S&P 500 index.
—Andrew Bary and George Glover
