Berkshire Hathaway Inc. announced March 14 it will buy Wickliffe-based specialty chemicals maker Lubrizol Corp. for $9.7 billion in cash.
The transaction, which has been approved unanimously by the boards of both companies, values Lubrizol at $135 per share. Lubrizol shares closed trading March 11 at $105.44. The purchase price represents a 28 percent premium over that closing price and is 18 percent higher than Lubrizol's all-time high closing price, according to Berkshire Hathaway.
Lubrizol will remain located at its Wickliffe headquarters and will continue to be led by its current management team, Omaha, Neb.-based Berkshire Hathaway said.
The companies expect the transaction to be completed during the third quarter of 2011.
Lubrizol is exactly the sort of company with which we love to partner the global leader in several market applications run by a talented CEO, James Hambrick, said Warren Buffett, Berkshire Hathaway CEO, in a statement.
Buffett said he had only one instruction to Hambrick: Just keep doing for us what you have done so successfully for your shareholders.
Hambrick said the transaction provides compelling value to our shareholders and is a clear endorsement of the growth and diversification success Lubrizol has achieved.
We are very excited to have the opportunity to become part of the Berkshire Hathaway family, he said in a statement. We believe its philosophy of supporting long-term global investments in technology, assets and employees will enhance execution of our growth strategies. Such a long-term commitment is more important than ever in today's global economy to deliver true market-leading products and services for our customers.
In 2010, Lubrizol generated about 30 percent of its sales and about 20 percent of its operating income from its Advanced Materials unit, which includes its market-leading Estane-brand thermoplastic polyurethane. The unit's sales grew 18 percent in 2010 to more than $1.5 billion, while its operating income shot up 35 percent to $227 million.
The Advanced Materials unit operates a research center and group headquarters in Brecksville, Ohio. Lubrizol acquired the business then known as Noveon for $1.4 billion in 2004 from private equity firm AEA Investors Inc.
The transaction is subject to the approval of Lubrizol's shareholders and the satisfaction of customary closing conditions. After the close of the transaction, Lubrizol will operate as a subsidiary of Berkshire Hathaway.
Citi and Evercore Partners are acting as financial advisers to Lubrizol, which is using Jones Day as its legal counsel. Leaders of the Jones Day deal team are Lyle Ganske and James Dougherty, both Cleveland partners.
Berkshire Hathaway's transaction counsel is Munger, Tolles & Olson LLP.
Lubrizol was founded in 1928. Its technologies include lubricant additives for engine oils, other transportation-related fluids and industrial lubricants, and fuel additives for gasoline and diesel fuel.
The company has about 6,900 employees around the world. Lubrizol owns and operates manufacturing plants in 17 countries. Revenues in 2010 were $5.42 billion, an 18 percent increase from sales of $4.59 billion in 2009.