Buffett stake sends Axalta shares up
Shares of paint company Axalta Coating Systems (AXTA) jumped more than 6% in early trading Tuesday after the company said billionaire investor Warren Buffett has taken a stake.
An affiliate of Buffett's Berkshire Hathaway company has agreed to buy 20 million of Axalta's common shares for $28 a share, or $560 million, th
e company said Tuesday.
That's below Axalta's closing price Monday of $28.33 a share. Still, the purchase sent shares of the Philadelphia company up 4.8% in early trading to $29.70 a share.
The purchase will give Buffett a 8.7% stake in Axalta, which makes liquid and powder coatings for the auto and transportation industry. Axalta will not receive proceeds from the sale.
Berkshire Hathaway has agreed as part of the deal to not dispose of the shares for 90 days following the closing of the sale. Axalta has also agreed to provide Berkshire Hathaway with certain "registration" rights following the expiration of the 90-day period.
Under the deal, the stock was purchased in a so-called private placement transaction, and not registered in accordance with U.S. securities laws, which means they may not be offered or sold in the U.S. until they are registered or given exemption from registration requirements.
"We are pleased to have Berkshire Hathaway Inc. take this share ownership position in Axalta," said Charlie Shaver, chairman and CEO. "Berkshire is the type of quality investor that Axalta has been fortunate to attract since our IPO last year. We believe this investment shows
Of course, Buffett's Berkshire is having a rough year with its publicly traded stock portfolio. Five of Berkshire's top 20 stock holdings are among the worst performing stocks in the Dow Jones industrial average this year, including Coca-Cola Company, down 2.5% for the year.Berkshire's support of our strategy to reshape ourselves into a growth and customer oriented, world class coatings company."
American Express, Berkshire's fourth-largest stock holding, is down 14.4% this year, while Procter & Gamble is down 8.8%. Walmart, Bershire's fifth-largest stock holding, is down 5.7%.
Only one of Buffett's top 20 stocks, International Business Machines, is among the Dow's top performers this year, up 1%.