Earlier today, Berkshire announced that it's shelling out $2.05 billion to buy the 20% stake of IMC International Metalworking Companies -- aka Iscar -- that it didn't already own.
Here are three key points that shareholders should take away from this deal.
1. Iscar's price skyrocketed.
Back in 2006, Buffett paid $4 billion for an 80% stake in Iscar. That means that the $2 billion / 20% stake that was announced today suggests that the company's value has doubled over that time frame. Of course, price doesn't always line up perfectly with value, so it could also mean that Buffett paid a sweetheart price up front and is now paying market to make Iscar a fully owned entity.
Either way, for Buffett to pay double the original valuation, it should be pretty safe to say that Iscar has performed well.
2. Buffett's serious about putting money to work.
Buffett's motto at the moment may as well be "Have cash, will invest." I don't mean to imply that he's interested in throwing that cash around willy-nilly, but I think we should fully expect that he's dead-set on finding a productive home for the green stuff that Berkshire operating companies are spitting out. And they don't all have to be big bites -- as my fellow Fool Steve Symington pointed out, Berkshire has done quite well with "bolt-on" acquisitions as well.
3. Save flashy for the dance floor.
Here's how Berkshire's annual report describes IMC's business:
IMC B.V. is one of the world's three largest multinational manufacturers of consumable precision carbide metal cutting tools for applications in a broad range of industrial end markets...
Not exactly the stuff that venture-capital dreams are made of. But whether we're talking about the investments that Buffett is making for Berkshire or the investments we're making in our own portfolios, there aren't any extra points for investments that lead to great cocktail conversations. There are only investments that make us money, and those that... well, don't.
Benefiting from Buffett's deal-making
Thanks to the savvy of investing legend Warren Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!