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I'm still scratching my head trying to figure out how Marmon at a $14 billion valuation (the level at which Berkshire increased its stake from 80 to 90%) represents an "excellent value" at over 12x pre-tax earnings.

It probably doesn't, but the purchase and the price were locked in 5 years ago. From Dec 2007: "Berkshire will acquire the rest of Marmon by 2014 at a cost determined by the firm's future earnings."

At the time, Berkshire bought 60% for $4.5 bn, and Marmon was reported to have $794 mn in operating income. 60% of 794 is 476, 4500/476 is 9.4, and a 9.4 multiple on operating earnings is probably close to a 12 multiple on pre-tax earnings, so I think we should see this purchase as just following through on the original decision, not a new decision.

Regards, DTM
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