Warren Buffett, the chairman and CEO of conglomerate,
Berkshire Hathaway Inc.
is planning to buy an equity stake in Axalta Coating Systems.
Buffett will buy $560 million worth shares in Axalta from private
equity investor Carlyle Group. In 2013, Carlyle Group had bought
the business from DuPont Co. for $4.9 billion.
Axalta provides a range of performance and transportation coatings,
and is the world's biggest supplier of coatings to auto-repair
shops and the second-largest provider to manufacturers of cars and
light trucks. Berkshire, already owns paint company Benjamin Moore
This investment perfectly fits Buffett's increasing interest in
automotive industry. Last month, Berkshire Hathaway opened its
automotive business by acquiring Van Tuyl. At that time, Buffett
had expressed his desire to scale up his investments in the
automotive as the industry has bright growth prospects courtesy of
an improving economic and employment scenario along with consistent
gross U.S. product growth. After staying away from the industry for
long, he said that he has only embarked on a journey that might
have no end.
This investment will comprise 8.7% of equity in Axalta and will
make Berkshire Hathaway its largest shareholder after Carlyle. But
given Buffett's desire to bolster his automotive investments, it
would not come as a surprise if he acquires the entire company. If
Buffett does so, Axalta will be a good bolt-on acquisition to
enhance the earnings of its existing business.
Berkshire Hathaway sports a Zacks Rank #1 (Strong Buy). Other
players with the same Zacks Rank include Allied World Assurance
Company Holdings, AG
, Endurance Specialty Holdings Ltd.
and Arch Capital Group Ltd.
and are also worth considering.
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