Heinz Deal: Warren Buffett Builds Berkshire Hathaway Through Big Purchases

Friday, 15 Feb 2013 02:49 PM

By Dan Weil

A    A   |
   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink
Image: Heinz Deal: Warren Buffett Builds Berkshire Hathaway Through Big Purchases
Berkshire Hathaway CEO Warren Buffett (Photo by Jemal Countess/Getty Images for Time Inc.)
Legendary investor Warren Buffett has molded his Berkshire Hathaway into a $249 billion company with an array of shrewd deals during the last 50 years. The latest deal was Berkshire’s agreement to buy H.J. Heinz in partnership with 3G Capital for $23 billion.

The deals have varied in size, growing along with the company’s heft. And they have been spread across a variety of industries — from See’s Candies to the specialty chemical company Lubrizol.

Buffett likes to purchase corporations with solid financials and sound management that he can hold for decades.

Warren Buffett and Berkshire Hathaway’s Top Deals

BNSF (Burlington Northern Santa Fe) Railway. Berkshire took full control in 2010 with a $26.3 billion deal. Including the firm’s prior investment, the deal totaled $44 billion. “It’s an all-in wager on the economic future of the United States,” Buffett said at the time. “I love these bets.” Analysts were impressed with Buffett’s move.

“It is Warren being Warren, taking advantage of a market that is soft at a time when the possibility for competitive bids is relatively low,” Tom Russo, a partner at Gardner Russo & Gardner, told Bloomberg. “He looks at this as a business that has advantages against other forms of transportation.”

Secret ‘Financial War’ Will Wipe Out Your Wealth, Warns Pentagon Adviser

H.J. Heinz. Berkshire announced the $23 billion deal Thursday. Heinz represents a perfect Buffett company, with a well-regarded global name and impressive financial performance. “It’s a great brand, and it makes a lot of sense for Berkshire,” Paul Lountzis of Lountzis Asset Management told The Wall Street Journal. “It is predictable, it is relatively stable, and you can look out 10, 20 years from now and know what the company will be like. Ketchup will still be ketchup. It isn’t going anywhere.”

Berkshire also was able to partner with Brazilian-owned private-equity firm 3G, which can assume operational duties. The Heinz deal is another sign from Buffett “that that I’m still here, guys,” Buffett biographer Andy Kilpatrick told The Associated Press.

Gen Re (General Reinsurance). Berkshire bought the reinsurer for $22 billion in 1998. “General Re brings a lot of float to the party,” Buffett said at the time. Float refers to the premium income that can be invested by insurers before they have to pay any of that money in claims. “This combination virtually assures both Berkshire and General Re shareholders that they will have a better future than if the two companies operated separately,” Buffett said.

Lubrizol. Berkshire took over the company for $9 billion in a 2011 deal. “Lubrizol is exactly the sort of company with which we love to partner — the global leader in several market applications run by a talented CEO,” Buffett said at the time. Investors approved as usual. “It’s going to be around forever because you need this stuff to run the world,” hedge-fund manager Jeff Matthews told Bloomberg. “He’s not stealing it.”

Bank of America. In addition to buyouts, Berkshire purchases stakes in companies. Buffett agreed to buy $5 billion of BofA preferred stock in 2011. The struggling bank was able to gain credibility from Buffett’s willingness to invest in it. “This proves to the market that, if the bank needs additional capital, which we don’t believe they do, but if they needed to calm the market by raising capital, they could do it within 30 minutes with a quick call to Uncle Warren,” Sean Egan, managing principal of Egan-Jones Ratings, told Reuters at the time.

And the 82-year-old Buffett says he’s not done dealing yet if more opportunities should present themselves. “He certainly has the capital to do another deal,” Matt McCormick, a money manager at Cincinnati-based Bahl & Gaynor Investment Counsel, told Bloomberg.

Robbed: Secret ‘Financial War’ Will Wipe Out Your Wealth, Warns Pentagon Adviser

© 2014 Moneynews. All rights reserved.

   Email Us   |
   Print   |
   Forward Article  |
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Retype Email:
Zip Code:
You May Also Like
Around the Web

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved