Berkshire Hathaway to Acquire 8.7% Stake in Axalta Coating - Analyst Blog

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Warren Buffett, the chairman and CEO of conglomerate, Berkshire Hathaway Inc. BRK.B 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 & Co.

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 AWH , Endurance Specialty Holdings Ltd. ENH and Arch Capital Group Ltd. ACGL and are also worth considering.

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