A Berkshire Hathaway subsidiary gained roughly $30 billion in estimated value last week because General Electric bought something else. GE Aerospace agreed to pay $11.75 billion for Consolidated Precision Products, one of the few companies that competes with Berkshire's Precision Castparts.
Barron's called the price steep, about 26 times projected 2027 earnings before interest, tax, depreciation and amortisation. Precision Castparts is roughly six times CPP's size by revenue and heading for around $12 billion of sales this year. Apply the same multiple and you get about $100 billion, which is what Barron's did — a month after putting the same unit at $60 billion to $75 billion.
A listed company is repriced every second the market is open. A wholly owned subsidiary is repriced when somebody sells a comparable one. Berkshire does not break out what Precision Castparts is worth, and Greg Abel, like Buffett before him, does not do analyst calls or investor days, so there is no running commentary to attach a number to. For a decade the only public figure anyone could point at was a subtraction: $9.8 billion written off in August 2020, with about 10,000 jobs cut, after the pandemic grounded the airlines its parts fly on. Buffett had already conceded he overpaid at $37.2 billion in 2016 and had been too optimistic about what the business would earn.
What revived it is not mostly aviation. Reuters reports a shortage of the complex castings Precision Castparts makes — the parts essential to engine turbine blades, and the same parts that go into the natural gas turbines now being built to power AI data centres. A bet on jet engines is being remarked by electricity demand.
And the earnings are real, which is the part that complicates the arithmetic. Barron's case is not that a rich multiple got stapled to a flat business; it is that the unit's performance is accelerating underneath it. Somebody applying 26 times to a company shrinking would be laughed at. Nobody is laughing.
But nobody has bid, either. There is no offer for Precision Castparts, Berkshire's books still carry the written-down figure, and the market is not paying up for the discovery: Berkshire's B shares trail the S&P 500 by more than ten percentage points this year. Andrew Bary's explanation is that the company does not talk about it, so the value sits there unremarked.
In ten years the business has had exactly two public valuations. One was produced by a pandemic, the other by a transaction it had nothing to do with. Neither was set by anyone buying or selling Precision Castparts.
A listed company is repriced every second the market is open. A wholly owned subsidiary is repriced when somebody sells a comparable one.
