Berkshire Acquires Taylor Morrison for $8.5 Billion, Sells Chevron Stake

Original author: Zhao Ying

Source: Wall Street Journal

Berkshire Hathaway is defining its post-Buffett investment style in action—reducing its stake in Chevron at elevated levels and investing $8.5 billion aggressively in the U.S. residential market.

According to The Wall Street Journal on the 31st, Berkshire has agreed to acquire U.S. homebuilder Taylor Morrison in an all-cash transaction at $72.50 per share, representing a premium of approximately 24% over the stock’s closing price last Friday, with an equity value of about $6.8 billion and a total enterprise value of $8.5 billion including debt. This is the first major acquisition completed by new CEO Greg Abel since he succeeded Buffett in January.

Meanwhile, Berkshire reduced its stake in Chevron by approximately $8 billion in the first quarter, cutting its ownership percentage in the company by about one-third.

The two actions together clearly illustrate Abel’s asset allocation strategy: realizing gains from energy investments at elevated levels and shifting capital toward the cyclical recovery in the residential sector. This combined approach is expected to reinvigorate market confidence—Berkshire Class B shares have declined 28% over the past year, with investors previously holding back due to uncertainty around management succession.

Abel officially assumed the role of CEO in January this year, approximately six months ago. According to sources familiar with the matter, Abel proactively reached out to Sheryl Palmer, CEO of Taylor Morrison, this spring through a referral from an advisor and drove the negotiations toward completion. The transaction is expected to be finalized in the second half of this year, with Palmer remaining in her position after closing.

Abel stated in the announcement that Taylor Morrison will be integrated with Clayton Homes, a subsidiary of Berkshire Hathaway, "enabling us to help more Americans achieve the dream of homeownership." This statement provides a clear strategic rationale for the acquisition—by integrating its residential-related assets, the company aims to build a more comprehensive housing industry chain.

At this year's Berkshire shareholder meeting, Abel publicly stated that the company had compiled a list of target acquisition candidates and emphasized that "market dislocations will provide us with opportunities to act." This swift move has been viewed by outsiders as a significant signal of Abel delivering on his promise and demonstrating strong merger and acquisition execution.

Taylor Morrison, headquartered in Scottsdale, Arizona, operates in 21 markets across 12 U.S. states and generated $8.1 billion in revenue last year. In addition to its traditional residential development business, the company operates rental communities under the Yardly brand and offers financial services such as mortgage lending to its customers.

This acquisition takes place amid a modest recovery in the U.S. single-family home construction industry. According to the National Association of Home Builders (NAHB), total U.S. single-family home starts are forecast to increase slightly by 1% this year to 940,000 units, with a further 5% increase expected next year to approximately 984,000 units.

Berkshire is no stranger to this sector. Previously, the company has held stakes in DR Horton, Lennar, and NVR—competitors of Taylor Morrison—and owns paint manufacturer Benjamin Moore and roofing and insulation company Johns Manville. Acquiring Taylor Morrison directly further deepens its existing industry footprint.

In addition, the residential construction industry has been a key focus area for the Trump administration in promoting housing affordability ahead of the midterm elections. Taylor Morrison has participated in discussions regarding a federal "rent-to-own" program designed to help more Americans enter the housing market and absorb excess inventory, providing additional policy tailwinds for this transaction.

Around the time of the announcement of the acquisition of Taylor Morrison, Berkshire sold approximately $8 billion in Chevron shares during 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 the fourth-largest shareholder of Chevron after the sale, with an average transaction price of $182.59 per share, according to Bloomberg data.

Chevron's stock reached a historical high in March this year amid the U.S.-Middle East conflict and soaring oil prices, providing Berkshire with an ideal opportunity to realize gains. Reviewing its holding history, Berkshire initiated its position in Chevron when the stock was around $65 in 2020, increased its stake around $124 during and around the time of the Russia-Ukraine conflict in 2022, and now sold at an average price exceeding $182, generating substantial cumulative profits.

The deeper significance of this transaction lies in the renewed scrutiny of the direction of Berkshire's massive cash reserves. As of the end of the first quarter this year, Berkshire's cash and short-term U.S. Treasury holdings reached a record $381.1 billion.

In the final years of Buffett's leadership, the pace of corporate acquisitions slowed significantly. In October last year, Berkshire acquired OxyChem, a division of Occidental Petroleum, for $9.7 billion, at a time when Abel was still in a transitional role. Earlier this year, the company also established a new $2.6 billion position in Delta Air Lines shares.

In his first annual letter to shareholders this year, Abel reaffirmed the company’s acquisition philosophy: "Major investment opportunities can be shared with us in confidence and receive a swift response." He also emphasized that substantial cash reserves do not mean stepping back from investing; the company will remain patient and disciplined in seeking truly suitable opportunities.

The market generally believes that Abel’s completion of this large transaction within six months of taking office increases the likelihood that Berkshire will further utilize its cash reserves and accelerate its merger and acquisition activities. In this transaction, Goldman Sachs and Moelis served as financial advisors to Taylor Morrison, Simpson Thacher provided legal counsel, and Gibson Dunn acted as legal advisor to Berkshire.