Berkshire Hathaway to purchase Lubrizol for $9 billion

Chemical company Lubrizol fits typical Berkshire Hathaway acquisition: predictable case flow and low price-to-earnings ratio.

Carlos Barria/Reuters/File
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett attends the Berkshire Hathaway Annual Shareholders meeting in Omaha, Neb., in this file photo taken May 2, 2009. On Monday, Berkshire Hathaway announced it had bought Lubrizol, a chemical company.

By David Faber, CNBC anchor and reporter

Berkshire Hathaway has agreed to purchase chemical company Lubrizol in a $9 billion cash deal worth $135 per LZ share, the two companies said Monday. The price, a roughly 28 percent premium to Lubrizol's close on Friday is also about 18 percent above the stock's all time high.

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 EBITDA.

Talks between the two companies began only a few weeks ago and culminated quickly in a deal that represents one of the larger acquisitions undertaken by Berkshire.

Buffett, in his recent shareholder letter, said he was actively pursuing acquisition targets to use some of Berkshire's cash.

Boards of both companies agreed to the deal over the weekend.

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