Buffer Case Study

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Executive Summary Berkshire Hathaway (BH) is planning to acquire Pacific Corp (PC). Both companies are located in the U.S.A. BH is a manufacturing company which was incorporated in 1899 as Berkshire Cotton Manufacturing and merged with Hathaway Manufacturing 56 years later, in 1955. During the next 20 years textile group generated enough cash and bought two insurance companies. As of 2004 the BH was described as a holding company owning subsidiaries engaged in a number of diverse business activities. At that time BH's portfolio included: insurance, apparel, building products, finance &financial products, flight services, retail, grocery distribution, carpet&floor coverings. PC was a leading, low-cost energy producer and distributor that served millions of customers in six states in the western US. The Company generated power through company-owed coal, hydrothermal, renewable wind-power, gas-fired combustion, and geothermal facilities. For past the several years, BH had been unsuccessful in identifying attractive acquisition opportunities. The announcement of the acquisition of the PC by the BH's wholly owned subsidiary, MidAmerican Energy Holding Co. seems to indicate that BH found a great opportunity. So on May 2005 it has been agreed that PC will become a subsidiary of BH. It seems that both companies will benefit from the acquisition and market will react. Market Reaction According to Appendix 1,which illustrates the performance of Berkshire Hathaway and Scottish power on 24th of May, the stock market reacted positively to the announcement of the acquisition for bothe companies. Berkshire’s stock price increased considerably by 2.4%, from $83,490/share to $85,500/share, raising the market value of Berkshire Hathaway by $2.55 billion. During the same day Scottish power’s stocks price soared by 6.28%, from £441,88/share to £469,63/share. The

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