Original author: Zhao Ying
Original source: Wall Street News
Berkshire Hathaway is defining its post-Buffett investment style through action — divesting Chevron at a high level while making a bold $8.5 billion bet on the U.S. housing market.
According to a Wall Street Journal report on the 31st, Berkshire has agreed to acquire U.S. homebuilder Taylor Morrison in an all-cash deal at $72.50 per share, representing a premium of approximately 24% over its closing price last Friday. The equity value is about $6.8 billion, with an enterprise value totaling $8.5 billion including debt. This is the first major acquisition completed by new CEO Greg Abel since he succeeded Buffett in January this year.
Simultaneously, Berkshire reduced its stake in Chevron by approximately one-third, selling around $8 billion worth of shares in the first quarter.
The combination of these two moves clearly outlines Abel's asset allocation preference: realizing gains from the energy sector at a high point and shifting capital to the cyclically recovering housing sector. This one-two punch is expected to reinvigorate market confidence — Berkshire's Class B shares have fallen 28% over the past year, with investors previously taking a wait-and-see approach towards the management transition.
Abel's Debut: A Move in the Housing Sector Within Six Months
Abel officially became CEO in January this year, roughly six months ago. According to informed sources, Abel proactively reached out to Taylor Morrison CEO Sheryl Palmer this spring through an advisor's introduction and drove the negotiations to a close. The transaction is expected to be completed in the second half of this year, with Palmer remaining in her position post-closing.
Abel stated in a declaration that Taylor Morrison will be integrated with Berkshire's Clayton Homes in the future, "enabling us to help more Americans achieve the dream of homeownership." This statement provides a clear strategic rationale for the acquisition — building a more complete housing industry chain by integrating existing residential-related assets.
At the Berkshire Hathaway annual shareholders' meeting earlier this year, Abel publicly stated that the company had compiled a list of potential acquisition targets, emphasizing that "market dislocations will provide us with opportunities to act." This swift move is seen by the outside world as an important signal of Abel fulfilling his promise and demonstrating deal-making execution capabilities.
Betting on Housing Recovery: Industry Logic and Policy Background
Taylor Morrison is headquartered in Scottsdale, Arizona, with operations covering 21 markets across 12 U.S. states and generating $8.1 billion in revenue last year. In addition to traditional homebuilding, the company operates rental communities under the Yardly brand and provides mortgage and other financial services to customers.
This acquisition takes place against the backdrop of a moderate recovery in the U.S. residential construction industry. According to the National Association of Home Builders (NAHB), new single-family housing starts in the U.S. are projected to increase slightly by 1% to 940,000 units this year and potentially rise another 5% to about 984,000 units next year.
Berkshire is no stranger to this sector. The company already holds stakes in Taylor Morrison's competitors DR Horton, Lennar, and NVR, and owns paint manufacturer Benjamin Moore and roofing/insulation company Johns Manville. The direct acquisition of Taylor Morrison represents a further deepening of its existing industry footprint.
Furthermore, the residential construction industry is a key area for the Trump administration's push on housing affordability ahead of the midterm elections. Taylor Morrison has participated in discussions regarding a federal "rent-to-own" program aimed at helping more Americans enter the property market and reduce inventory backlogs, providing some additional policy tailwind for this deal.
Divesting Chevron: Realizing Energy Gains at a High
Around the time of announcing the Taylor Morrison acquisition, Berkshire sold approximately $8 billion worth of Chevron shares in the first quarter, reducing its stake from about one-third to 4.2%.
According to regulatory filings submitted by Berkshire on Friday, the company remains Chevron's fourth-largest shareholder post-sale. Bloomberg data indicates the average selling price was $182.59 per share.
Chevron's stock price hit an all-time high in March this year against the backdrop of Middle East conflict and surging oil prices, providing Berkshire with an ideal window for realization. Looking back at the holding history, Berkshire initiated a position in Chevron around $65 per share in 2020, increased holdings around $124 around the outbreak of the Russia-Ukraine conflict in 2022, and now divested at an average price exceeding $182, yielding substantial cumulative gains.
Cash Deployment: The Destination of the $381.1 Billion Reserve
The deeper significance of this deal lies in the renewed scrutiny of the direction of Berkshire's massive cash pile. As of the end of the first quarter, Berkshire's holdings of cash and short-term U.S. Treasury securities reached a record $381.1 billion.
In Buffett's final years at the helm, the company's M&A pace noticeably slowed. In October last year, Berkshire acquired Occidental Petroleum's OxyChem unit for $9.7 billion, a period when Abel was still in the succession stage. In the first quarter of this year, the company also initiated a new $2.6 billion position in Delta Air Lines shares.
In his first annual letter to shareholders this year, Abel reiterated the acquisition philosophy: "Significant investment opportunities can be shared with us in confidence and receive a prompt response." He also emphasized that the massive cash reserve does not mean exiting investments; the company will remain patient and disciplined, seeking truly suitable opportunities.
The market widely believes that Abel's completion of this large-scale deal within six months of taking office increases the likelihood of Berkshire further deploying its cash reserves and accelerating its acquisition pace. In this transaction, Goldman Sachs and Moelis served as financial advisors to Taylor Morrison, with Simpson Thacher providing legal advisory services; Gibson Dunn served as legal counsel to Berkshire.
