Warren Buffett Johns Manville Investment. Why Warren Buffett invested in Johns Manville at 5x EBIT, at an opportune time when Johns Manville was out of favor on Wall Street.
Buffett acquired Johns Manville for $1.8 billion in 2000. Johns Manville is America’s biggest manufacturer of fiber glass building insulation, commercial roofing membranes and roof insulations, filtration media, and mats and reinforcements. As the dominant player in its field, Johns Manville enjoys barriers to entry and thus earns high returns on investment capital – this makes the investment an attractive one for Warren Buffett.
Warren Buffett Paid $1.8 Billion for Johns Manville
Buffett paid $1.8 billion for $344 million of before tax earnings – a 5x pre-tax earnings multiple implies a 19% pre-tax return. This was despite the fact that the company grew its earnings per share at an average rate of 10% over the past 10 years from 1990 to 2000. Johns Manville had been valued poorly by Wall Street because its asbestos liability caused it to file for bankruptcy in 1982.
How Buffett Found Out about Johns Manville
How Buffett sourced this deal was interesting: he read in the papers about a failed LBO deal due to a lack of financing on Friday – he called the following Monday and got the deal done. It pays to have an elephant gun and a big wallet in times like these – when Buffett can close deals when others cannot.