Berkshire Hathaway Unit Precision's $734M Award Against German Pipemaker Upheld By New York Court

United States District Court in Manhattan on Wednesday upheld an arbitration panel's decision to award $734 million to Berkshire Hathaway Inc's (NYSE: BRK-A) (NYSE: BRK-B) subsidiary Precision Castparts Corp. against a German pipemaker that purportedly inflated revenue and profit to attract a buyout from Berkshire.

What Happened

Schulz Holding GmbH sold its U.S. and German concerns to Precision, a global manufacturer of complex metal components and products, for $913 million in 2017, Reuters reported.

Precision accused Schulz of using backdated orders and fabricated invoices to ratchet up its revenue and profits, while in reality, the German firm was near bankruptcy.

The Portland, Oregon-based company estimated the real value of the Schulz purchase to be about $179 million.

On April 9, an arbitration panel ruled in favor of Precision, saying, "The evidence strongly points to fraud, and there is little in the record to suggest otherwise."

U.S. district judge Lewis Liman, confirming the award, said that the panel who arbitrated the matter employed "sound" reasoning against Schulz.

Why It Matters

The acquisition of Precision by billionaire investor Warren Buffett's firm in 2016 remains its largest at $32.1 billion, Reuters noted.

In June, the metals part manufacturer laid off 717 workers citing the ongoing COVID-19 pandemic, which resulted in a "dramatic loss of business."

According to Reuters, Berkshire Vice Chairman Greg Abel, at the company's annual meeting on May 2, said that Precision's defense contract business was "very sound and strong."

Price Action

Berkshire Class A shares closed 0.26% higher at $285,520, and Class B shares closed 0.45% higher at $190.56 on Wednesday.

Photo credit: USA White House via Wikimedia