Less than a month after we mused at Berkshire's most recent cash hoard which as of March 31 stood just shy of $400 billion, and wondered who Warren Buffett's replacement Greg Abel will acquire first...
... we got the answer on Sunday afternoon, when Berkshire announced it will acquire homebuilder Taylor Morrison Home Corp. in an all-cash deal worth about $6.8 billion. Which means that after the deal, Berkshire still has $390 billion in T-bills collecting about 3.5%.
The offer of $72.50 per common share represents a 24% premium to the home builder’s latest closing price on Friday. The deal is expected to close in the second half of this year.
Taylor Morrison is one of the largest community developers and homebuilders in the US and also offers financial services like home loans, titles, escrow and insurance to consumers, according to the statement. The firm has more than 350 communities across 12 states. The existing Taylor Morrison management team, including Chief Executive Officer Sheryl Palmer, will continue to lead the firm, according to the statement.
“We are excited to welcome Taylor Morrison into Berkshire’s portfolio,” Greg Abel, chief executive officer of Berkshire Hathaway, said in a statement Sunday. “Over time, we expect to unify our site-built homebuilding operations into a combined platform enabling us to deliver the dream of homeownership to more Americans.”
This is the first multibillion-dollar acquisition under Abel, who took over Berkshire Hathaway earlier this year after Warren Buffett retired last year. While investors have been satisfied with Abel’s command over the sprawling conglomerate, some have been hoping that a deal could support Berkshire’s shares, which fell 5.6% so far this year, largely due to Berkshire's lack of exposure to the AI bubble. The S&P 500 index gained 10.7% in the same period.
It is unclear if the deal signals that Abel believes the bottom for the US housing market is coming, or if Berkshire is buying a homebuilder during a brutal housing labor shortage, giving companies like Taylor Morrison operating leverage despite sky high mortgage rates. In any case, while millions of Americans have been hoping and praying that 8% mortgage will crash the housing market - which has never been more unaffordable - and allow them to enter at lower price, the investor with the biggest cash pile in history just bought a builder outright with cash from under the rug, as a three million home supply deficit clearly overrides the soaring cost of capital.