Buffett's Trigger Finger Snags Lubrizol on the Cheap (LZ, BRK-A, BRK-B)

Lubrizol Corporation (NYSE: LZ) is one comnpany we would not have really guessed as being a Warren Buffett acquisition target.  This morning came the news that Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) is acquiring the specialty chemicals company for about $9 billion.  Its segments are in fuel additives, transportation-related chemicals, and fuel and engine chemicals.

The cash buyout comes to $135.00 per share and Lubrizol has traded in a 52-week range of $77.65 to $117.62.  This new buyout price represents an all-time in shares going back to before the 1990’s for the Wickliffe, Ohio-based company.  While the company will become a wholly-owned subsidiary of Berkshire Hathaway, this will run independently under its existing management team.

Revenues at Lubrizol for the last three-years were as follows: 2010 $5.417 billion; 2009 $4.586 billion; and 2008 $5.027 billion.  In those years, earnings in ‘net income’ were as follows: 2010 $732.2 million; 2009 $500.8 million; 2008 -$66.1 million.

If you include the debt on the books, the deal comes to roughly $9.7 billion.  Warren just recently said he was getting an itchy trigger finger.  This deal just came sooner than expected.

With Thomson Reuters estimates of $11.31 EPS for 2011 and $12.48 EPS for 2012, the company trades at less than 12-times this year’s expected earnings and trades at less than 11-times 2012 earnings expectations.

Buffett snuck in and snagged another low-multiple company here.  Even at all-time highs this deal hardly looks expensive for a guy who would rather pay a premium for a solid company over buying a troubled company on the cheap.

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JON C. OGG