Category: Lubrizol

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Lubrizol Minority Stock Positions

Berkshire Reveals Major Stake in Phillips 66

(BRK.A), (BRK.B)

Berkshire Hathaway has revealed that it now owns more than ten-percent of refiner Phillips 66 (PSX).

In early 2014, Berkshire swapped a large portion of its previous Phillips 66 position for the Houston-based company’s chemical business unit, which was added to Berkshire’s specialty chemical maker Lubrizol.

“We were able to do that on a tax-advantage basis. We didn’t trade them because we didn’t like the stock,” Warren Buffett said on CNBC’s Squawk Alley.

“I had always intended on coming back in, assuming that the price was right.”

A Surprise Revealed

In its SEC Form 13F filing on July 31, 2015, Berkshire stated that “confidential information has been omitted from the public Form 13F report and filed separately with the U.S. Securities and Exchange Commission,” which implied that the company was amassing shares in a company that it would reveal at a later date.

Berkshire, in its SEC Form 3 filing on August 25, stated it had accumulated 54,800,415 shares of Phillips 66 common stock. The position is worth aproximately $4.5 billion, and including shares owned prior to July 31, Berkshire owns 58 million shares.

51,873,456 of the total reported securities are owned by National Indemnity Company, a subsidiary of Berkshire Hathaway, and no price for those shares was reported.

However, 6,102,000 of the total reported securities are owned by the following pension plans of Berkshire’s subsidiaries: FlightSafety International Inc. Retirement Income Plan (350,000), Fruit of the Loom Pension Trust (921,300), GEICO Corporation Pension Plan Trust (2,499,700), Johns Manville Corporation Master Pension Trust (2,187,000), and General Re Corp. Employee Retirement Trust (144,000). The purchase price of those shares ranged from $71.56-$77.26.

About Phillips 66

Phillips 66 was spun-off of ConocoPhillips in May 2012, and its refining and petrochemical business has been mostly immune to the downward pressure on oil prices, as the demand for refined products, including gasoline, diesel and aviation fuel remains strong. Phillips 66 also transports crude oil, refined products, natural gas and natural gas liquids (NGL). It gathers, processes and markets natural gas and NGL to power businesses, heat homes and provide feedstock to the petrochemical industry.

The company’s 52-week share price high was $87.98, and it currently pays an annual dividend of 56 cents, yielding 2.9%.

Buffett, Combs or Weschler

Berkshire does not normally announce which transactions are the work of Warren Buffett, and which transactions are the work of his two portfolio managers Todd Combs and Ted Weschler. While Warren Buffett has acquired most of Berkshire’s portfolio, Todd Combs and Ted Weschler each manage a portfolio that is roughly $9 billion in assets. The two investment managers are widely assumed to be the future managers of the entire portfolio.

The total portfolio slipped to a market value of $107.182 Billion at the end of second quarter from $110.776 billion at the end of the 1st quarter 2015.

(This article contains updated information from when it was first published.)

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Lubrizol

Is Axalta Coating Systems in Berkshire’s Crosshairs?

(BRK.A), (BRK.B)

Could a former DuPont unit be an acquisition target for Berkshire Hathaway’s Lubrizol Corporation?

Berkshire Hathaway has acquired a minority stake in Axalta Coating Systems (AXTA), a leading global coatings company “dedicated solely to the development, manufacture and sale of liquid and powder coatings.”

In a statement released by Axalta, “an affiliate of Berkshire Hathaway Inc. (“Berkshire Hathaway”) has entered into a definitive stock purchase agreement with certain affiliates of The Carlyle Group (“Carlyle”) for the purchase of a total of 20 million of Axalta’s common shares for an aggregate purchase price of $560 million, or $28.00 per share. Axalta will not receive proceeds from the sale of the shares. In connection with the purchase, Berkshire Hathaway agreed that it would not dispose of the shares for 90 days following the consummation of the sale. Axalta has agreed to provide Berkshire Hathaway with certain registration rights following the expiration of that 90-day period.”

The $28 share price is substantially below the $31.30 share price that Axalta was trading at after the announcement.

A Leader in Specialty Coatings

Headquartered in Philadelphia, Axalta is a worldwide leader in development and manufacture of specialty coatings.

The company lists the following facts on its website:

• More than 12,000 people who create, manufacture, distribute and support our products and services
• Doing business in 130 countries
• 35 manufacturing plants around the world
• 7 Research & Development centers on four continents
• Over 1,800 patents held or pending
• 45 training centers to support our refinish customers around the globe
• More than 120,000 customers including 4,000 distributors
• 2013 revenues of $4.3 billion

The company was founded in 1866 as Herberts, the original producer of Standox® paint products. Spun off of DuPont Performance Coatings in 2013, it was sold to the Carlyle Group and renamed Axalta Coating Systems. Today the company is a leader in coatings for commercial vehicles.

In Lubrizol’s Crosshairs?

While Berkshire has not formally announced the affiliate that acquired the Axalta stake, it would seem to be good fit for specialty chemicals manufacturer Lubrizol Corporation.

Lubrizol has been on an acquisition spree lately. In December 2013, Lubrizol acquired pipeline chemical maker Phillips 66 from ConocoPhillips. It was rechristened Lubrizol Specialty Products, Inc. In 2014, it acquired Warwick Chemicals, and Engineered Chemistry and Integrity Industries.

The Carlyle Group remains Axalta’s largest shareholder, with 150.3 million shares, and the question has to be whether the Berkshire stake is a prelude to Berkshire’s acquisition of Axalta as a subsidiary of Lubrizol?

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Berkadia Berkshire Hathaway Automotive Berkshire Hathaway Energy Berkshire Hathaway Specialty Insurance BH Media Lubrizol Marmon Group

2014 Berkshire Hathaway Acquisitions You Didn’t Hear About

(BRK.A), (BRK.B)

2014 was a busy year for Berkshire Hathaway, with over $5 billion in acquisitions both directly by Berkshire Hathaway and through its companies. I’m sure you heard about the purchase of Procter & Gamble’s Duracell battery division, but did you know that other acquisitions made Berkshire the leader in beverage dispensing, and got Berkshire into automobile retailing for the first time? Here is a list of some of the other lesser-known acquisitions. Did you miss any of them?

Marmon Retail & End User Technologies Acquires Cornelius, Inc.
Date: January 2014
What it is: Cornelius, Inc. is the world’s leading supplier of beverage dispensing and cooling equipment. They manufacture and market a broad line of beverage dispense solutions for soft drink, beer, ice, juice, tea, and frozen as well as a complete line of accessories.

Berkshire Hathaway Specialty Insurance Acquires MyAssist, Inc. from Noel Group
Date: January 2014
What it is: MyAssist is a technology-driven, cloud-based personal assistance solution that leverages advanced technologies to give customers a customized, personal experience. MyAssist provides Mercedes-Benz and Ford with live-agent personal-assistance and telematics service using “location-aware technology” from Verizon Communications Inc.

MiTek Acquires Ellis & Watts Global Industries
Date: April 2014
What it is: Ellis & Watts is the recognized leader in the engineering, design, and fabrication of highly customized HVAC and other products sold into the nuclear, military, and other industrial end markets.

EXSIF Worldwide, Inc. Buy’s OCS
Date: April 2014
What it is: OCS Limited is a tank rental and chemical supply company based in Aberdeen, United Kingdom. OCS operates in the offshore oil and gas sector, serving clients in the North Sea.

Berkshire Hathaway Acquires Van Tuyl Group
Date: April 2014
What it is: Van Tuyl Group is the nation’s largest privately-owned auto dealership group, which ranks fifth among all U.S. auto dealership groups.

Berkshire Hathaway Energy Acquires AltaLink
Date: May 2014
What it is: AltaLink owns 12,000 kilometers of transmission lines and 280 substations that bring electricity to 3 million customers in Alberta, Canada.

Berkadia Acquires Keystone Commercial Capital
Date: May 2014
What it is: Keystone Capital is a full-service commercial mortgage banking company headquartered in Phoenix that services more than $2 billion in commercial real estate loans.

BH Media Acquires Catamaran Group
Date: September 2014
What it is: Catamaran Group publishes 12 weekly papers, with circulations ranging from 7,000 up to 15,000, serving the southern New Jersey shore area. While the individual circulations are small, the combined circulations exceed 111,000.

Lubrizol Acquires Warwick Chemicals
Date: November 2014
What it is: Warwick Chemicals is a leading global developer, producer and supplier of stain removal technology with hygiene benefits. Headquartered in Mostyn, North Wales, Warwick Chemicals has strong positions with global and regional detergent producers. Their products are an essential element in laundry detergent powders and automatic dishwashing products used across five continents and in more than 50 countries.

Lubrizol Acquires Engineered Chemistry and Integrity Industries
Date: December 2014
What it is: Engineered Chemistry supplies additives and fluids for a range of oilfield activities, including cementing, drilling, flow assurance and fracturing. It offers chemistry expertise to solve problems throughout the oil and gas drilling process. The business consists of a core manufacturing and research organization which supports a global field distribution network. Engineered Chemistry was built through a series of acquisitions over the past 12 years and is headquartered in Houston, TX. It operates 10 sites located predominantly in North America. Integrity Industries manufactures drilling fluid systems, including diesel, mineral oil and synthetic oil based fluids. The company supplies these drilling fluid systems to retail drilling fluid companies along with technical support.

Berkshire Hathaway Acquires Charter Brokerage
Date: December 2014
What it is: Charter Brokerage is a leading global trade services company providing complete customs, import, export, drawback and related services.

There you have it!

Bolt-On Acquisitions Continue to Power Berkshire’s Growth

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Categories
Acquisitions Lubrizol

Lubrizol Continues Acquisitions Spree with Purchase of Two Weatherfield Units

(BRK.A), (BRK.B)

Berkshire Hathaway’s specialty chemical company Lubrizol has inked an agreement to purchase the oilfield chemicals business from Weatherford International PLC.

The acquisition is valued somewhere in the realm $750-$825 million.

The deal is the biggest “bolt-on” acquisition Lubrizol has made since it was acquired by Berkshire in 2011 for $9 billion, and comes only a week after it signed a deal to buy detergent compounds producer Warwick Chemicals, which is headquartered in Mostyn, North Wales.

Continued Expansion

Lubrizol has been on an acquisition spree of late. Only four months ago the company moved into the medical device market by acquiring Vesta Inc., a maker of catheters and tubing based on silicone and thermoplastics based in ranklin, Wisconsin.

Lubrizol’s revenues for 2013 were $6.4 billion, and the addition of the Weatherford units gives it an expanded footprint in the booming oil services business.

Under the terms of the deal, Lubrizol will acquire Engineered Chemistry and its drilling fluids business, known as Integrity Industries.

According to Lubrizol, the addition of these two businesses provide Lubrizol with a more significant footprint in the $20 billion oilfield chemicals business and more importantly, extensive applications experience and end-user relationships.

Engineered Chemistry supplies additives and fluids for a range of oilfield activities, including cementing, drilling, flow assurance and fracturing. It offers chemistry expertise to solve problems throughout the oil and gas drilling process. The business consists of a core manufacturing and research organization which supports a global field distribution network. Engineered Chemistry was built through a series of acquisitions over the past 12 years and is headquartered in Houston, TX. It operates 10 sites located predominantly in North America.

Integrity Industries manufactures drilling fluid systems, including diesel, mineral oil and synthetic oil based fluids. The company supplies these drilling fluid systems to retail drilling fluid companies along with technical support. The business has occupied the same niche for more than 25 years and is recognized as an expert in oil based drilling systems and chemicals serving customers across a large North American footprint. Headquartered in Kingsville, TX, Integrity Industries operates approximately 14 locations.

“This proposed acquisition provides us a new growth platform as we build out a multi-billion business in specialty chemicals and drilling fluids for the oilfield space,” said James L. Hambrick, Lubrizol chairman, president and chief executive officer. “With the addition of the companies’ technologies, combined with improved fluid formulation and applications knowledge, Lubrizol will be better positioned to innovate more quickly and become a solutions provider for both multinational oilfield service companies as well as more regional customers which have a significant share of the North American market.”

The new units will be run under the moniker of Lubrizol Oilfield Solutions.

Increasing Global Manufacturing Capability

In addition to acquisitions, Lubrizol has also been expanding its global manufacturing capability, opening an additives manufacturing facility in Zhuhai, Guangdong, China, in 2013, and breaking ground on a $50 million chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India, in April 2014.

Based in Wickliffe, Ohio, Lubrizol owns and operates manufacturing facilities in 17 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 7,500 employees worldwide. It sells its specialty chemical products in over 100 countries.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.