Warren Buffett Hits His Mark with $9 Billion Deal for Lubrizol

Warren Buffett may have let a 'zebra' get away in recent weeks, but today he hit his target.

While it may not be an 'elephant' on the scale of $26 billionfor Burlington Northern Santa Fe, it is still one of Berkshire Hathaway's "largest acquisitions in years."

Berkshire says in a news releasethis morning that it is buying Lubrizol for about $9 billion in cash, plus the assumption of another $700 million in debt.

That's $135 a share for the chemicals company, a 28 percent premium over Friday's closing price of $105.44 and an 18 percent boost from its all-time high.

In pre-market trading this morning, Lubrizol shares are up 27 percent to $134, just below the deal price.

Current price:

Lubrizol Chairman & CEO James Hambrick
Lubrizol Chairman & CEO James Hambrick

In the release, Buffett's focus on strong management is highlighted with this quote attributed to him:

"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. Our only instruction to James – just keep doing for us what you have done so successfully for your shareholders.”

As pointed out in David Faber's blogthis morning, "The company fits the typical profile favored by Warren Buffett in his purchases. It has fairly predictable cash flows and a high return on equity. The purchase price represents roughly 7.6 times Lubrizol's (cash flow.)"

And in typical Buffett fashion, this deal was done very quickly. David is hearing that negotiations began just a few weeks ago.

Current Berkshire stock prices:

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