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AMY SCOTT: Billionaire investor Warren Buffett announced a new purchase on Christmas Day. Buffett’s Berkshire Hathaway agreed to buy 60 percent of the manufacturing giant Marmon Holdings. At $4.5 billion it’s the biggest deal Buffett’s done outside the insurance business. Our New York Bureau Chief Jill Barshay has more.
JILL BARSHAY: The company Buffett is buying is owned by the Pritzker family of Chicago. The Pritzkers may be better known for their Hyatt hotel chain. But they also built Marmon into a conglomerate of 125 manufacturing and service companies. It’s in everything from water treatment to transportation. Forbes Magazine says Marmon is the 36th largest private company in the U.S.
Ned Armstrong is an analyst of industrial companies at FBR Capital Markets.
Ned Armstrong: They keep a pretty low profile, but I would say they’re pretty well known within the markets they compete.
Armstrong says industrial companies like Marmon are doing pretty well. Both Asian countries and oil companies are expanding and ordering the kinds of building materials that Marmon makes.
Armstrong: I think to the degree that it’s Berkshire Hathaway doing the buying. I think people will see that as validation that there’s value in old “rust belt” type of companies.
Buffett may be better known for owning insurance companies like GEICO. But manufacturing is not new to him. Bob Miles has written three books on Warren Buffett and his investing strategy. He says Buffett bought a similar diversified manufacturing company in Ohio 20 years ago. Buffett still owns it.
Bob Miles:: He’s the ultimate capitalist, buying old economy industries. The average company he’s purchased started in 1909.
But Miles says one of Buffett’s biggest investment mistakes was an American manufacturing company: an old New England textile mill. Buffett ended up shutting it down. The mill’s name: Berkshire Hathaway.
In New York, I’m Jill Barshay for Marketplace.
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