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Warren Buffet eyes Northeast Ohio's Lubrizol
Wickliffe specialty chemicals company to be sold for nearly $10 billion
by WKSU's AMANDA RABINOWITZ


Morning Edition Host
Amanda Rabinowitz
 
Lubrizol has been headquarted in the Clevleand suburb of Wickliffe since 1928.
Courtesy of Lubrizol
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Billionaire investor Warren Buffet plans to buy Northeast Ohio’s specialty chemicals maker Lubrizol for nearly $10 billion dollars. Many analysts say the deal is surprising, but - at first glance - a good one for the company and the region.  

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Lubrizol has been headquartered in the Cleveland suburb of Wickliffe for 80 years and makes chemicals that go into lubricants used in everything from car engines to metalworking gear. Warren Buffet’s Berkshire Hathaway holding company plans to buy the company for $9.7 billion in cash, making it Buffet’s second-biggest acquisition in the past decade. Berkshire is paying $135 per share, which is nearly a 30-percent premium over Lubrizol’s closing price on Friday. Dmitry Silversteyn, an analyst with Longbow Research in Cleveland says Lubrizol is a strong, well-managed company that turned over $5.4 billion in revenue last year. But he says the stock has sold at a lower-than-industry pricing level – and its actual market value is around $145 a share.

 

Silversteyn: "For Berkshire it’s an opportunity to buy an industry-leading company at a significant discount. Even at the premium that they’re paying, I think it’s still a discount to the company’s fair value. And hopefully will be able to generate that value, or unlock that value for the benefit of Berkshire shareholders."

 

Silversteyn says that since Lubrizol is not being sold to another specialty chemicals company, there likely won’t be any job cuts and its management should remain intact. 

 

Silversteyn: "Berkshire Hathaway has paid the price and being the company that it is, is clearly intent to continue to grow this business and to allow it to reach its full potential certainly I don’t see it limiting the investments that the company was prepared to make to drive its business - if anything it may allow them to gain access to even more capital."

 

In a statement, Lubrizol called the deal a "transformative event," and said it would allow the company "to focus on long-term plans without the constraints of short-term public market requirements." 

 

 
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