Warren Buffett Has $ 100 Billion to Spend, What’s He Going To Buy?

Warren Buffett Has $ 100 Billion to Spend, What’s He Going To

Berkshire Hathaway Inc. ( BRK.A ) ( BRK.B The CEO of Warren Buffett said on Tuesday, meaning the Oracle of Omaha has about $ 80 billion for acquisitions. “Net, we’re buying,” Buffett Said on CNBC. “We’re going down the road.” “For one thing, the money keeps coming so we’re going to keep buying,” he continued. The Omaha, Neb.-based company with a market capitalization of about $ 510 billion is a collection of businesses that range from food to insurance, manufacturing and utilities. “JP Morgan analyst Sarah DeWitt wrote in a Dec. 15, 2017 research note” The businesses benefit from best-in-class managements, unmatched balance sheet strength, and many of the companies have strong brands, scale or low-cost competitive advantages. . The Berkshire chairman is interested in investment opportunities, particularly bolt-on acquisitions, Edward Jones analyst Jim Shanahan told TheStreet. A bolt-on acquisition refers to the purchase of a company that merges into a division of the acquiring entity. Electronic components distributor TTI Inc., a subsidiary of Berkshire Hathaway, made a bolt-on acquisition just before the new year, buying South Korean semiconductors supplier Changnam INT Ltd. for an undisclosed sum. The purchase allows TTI to expand its presence in the South Korean market. Over the last 12 months, Berkshire made 27 deals, according to FactSet Research Systems Inc. Some of the transactions included the purchase of a 38.6% minority stake in Pilot Travel Centers LLC, owner of the Pilot Flying J truck stop chain; Berkshire subsidiary Marmon Engineered Components Co. PRISM Plastics, which manufactures injection molded plastic components, for an undisclosed sum; and, Clayton Homes Inc., another Berkshire subsidiary, acquired Harris Doyle Homes Inc. for an unknown price. More of What’s Trending TheStreet : Berkshire has laid out six criteria for acquiring a business. It must be a large purchase, at least $ 50 million before-tax earnings. The company must have been shown to be attractive and profitable. It should be a simple business – Buffett noted that “if there are lots of technology, we will not understand it” – and management must be in place. Lastly, there is to be an offering price. Berkshire said it will not engage in unfriendly takeovers. “If Berkshire is able to acquire a large business in an all-cash deal, we would typically expect a transaction to be immediately accretive to Berkshire’s [earnings per share],” Barclays’ Gelb said. Using Berkshire’s acquisition criteria, Bryan Adams, director of FactSet M & A, said that it could be more likely to capture targets, even if it was going to be a dubious task. In July 2017, Adams identified eight companies that meet Buffett’s standards, including L’Oreal SA ( LRLCY which has been identified by The Deal as a takeover target. The other acquisition targets Adams were announced by Adidas AG ( ADDYY ), BlackRock Inc. ( BLK ), Cognizant Technology Solutions Corp. ( CTSH ), Henkel AG & Co. ( Henky ), Nike Inc. ( NKE ), Public Storage ( PSA ) and SAP SE ( SAPGF ) – none of which The Deal has identified as M & A targets. Actelion Ltd. Charles Schwab Corp. initial on-the-spot ( SCHW ) Intuitive Surgical Inc. ( ISRG ) and VMware Inc. ( VMW ), he said. Notably, Actelion was Acquired by Johnson & Johnson ( JNJ ) in a $ 30 billion all-cash deal. For the time being, however, Buffett told CNBC that he does not have his sights set on any particular acquisition. But whenever Buffett decides to step away as CEO of Berkshire, the new CEO can begin selling, instead of buying. “On Buffett’s departure, the new CEO would be a non-core divestment, a relatively unprofitable or underperforming portfolio company,” said Shanahan. For example, McLane Co., a wholesale distributor of groceries and other items, is close to $ 20 billion in annual revenues, but its earnings of $ 500 million are negligible, Shanahan added. To be sure, Buffett has not indicated that he is imminently leaving the Oracle noted that he is in “remarkably good health.”

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