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Berkshire Hathaway-Owned Company Wins 643 Million Euros in European Arbitration Case

By Eric Volkman – Apr 16, 2020 at 6:45PM

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An arbitration panel finds that Precision Castparts was a victim of fraud when it acquired a German peer.

One of the many companies held in the portfolio of Warren Buffett's investment vehicle Berkshire Hathaway (BRK.A -1.04%) (BRK.B -1.09%) is about to reap a big financial award. On Wednesday, Precision Castparts, which makes components used in the aircraft and oil and gas industries, was awarded 643 million euros ($703 million) in an arbitration hearing.

A panel of the American Arbitration Association's International Center for Dispute Resolution found that Precision Castparts had been fraudulently coaxed into buying Schulz Holding, a Germany-based manufacturer of pipes and fittings. In February 2017, Precision Castparts agreed to pay 800 million euros ($874 million) for the German company. 

Warren Buffett.

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Arbitration proceedings on the matter started in early 2018, with Precision Castparts claiming that Schulz Holding exaggerated its revenue and profitability through fraudulent means such as fake invoices. Schulz Holding denied those claims.

In its 132-page ruling, the arbitration panel characterized the dispute as a nearly open-and-shut case. "The evidence strongly points to fraud, and there is little in the record to suggest otherwise," it wrote in the ruling.

Berkshire Hathaway hasn't commented on the outcome or on the monetary award. Buffett's company bought Precision Castparts in a splashy, $32 billion-plus deal that was agreed to in mid-2015. It was and remains Berkshire's most expensive acquisition. Today, Precision Castparts belongs to Berkshire's portfolio of fully owned companies.

Both classes of Berkshire stock declined a bit more precipitously than the key stock market indexes on Wednesday. The company's A shares fell by 2.1%, while class B dropped 2.1%.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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