Berkshire Hathaway: Trading At An Estimated 11.6x Earnings With An Intrinsic Value Of $180/Share
Left Shark Investing • 229 Comments
Left Shark Investing • 229 Comments
Sun, May 15, 3:31 AM
- On Friday, news broke that Berkshire Hathaway (NYSE:BRK.A) chairman Warren Buffett is backing a consortium that includes Quicken Loans founder Dan Gilbert in a bid for Yahoo (NASDAQ:YHOO).
- A successful bid would be a relatively rare journey into digital media for Buffett. But Rick Edmonds of Poynter Institute says Buffett’s history of betting on struggling companies that wield a large user base could work in Yahoo’s favor. “It’s kind of consistent with Buffett’s pattern of buying things that are out of favor, undervalued and have a big customer base,” he says. “The paradox is Yahoo's huge, it remains huge, and it's got a lot of customers. It's not the case customers are fleeing them right and left, it's just that no one can get a good pattern of growth."
- Note that former Yahoo president and CFO Susan Decker is now a director at Berkshire. Last month she said Yahoo’s next owner should "create a distinction in consumers' minds about why they love Yahoo still,” and that doing so would be better if Yahoo is "private or part of a much larger corporation." It’s possible that with Decker’s input, Buffett would look to rehire former Yahoo executives such as Ross Levinsohn.
- It’s possible that the consortium has an eye on Yahoo Finance. Sources say Gilbert has shown interest in that unit. Buffett also credited Yahoo with doing a “terrific” job of live streaming Berkshire’s shareholder conference, during which he noted BRK had been slow to adapt to new technology.
- Source: Reuters
- Now read A Shotgun Wedding For Yahoo! (Podcast)
Fri, May 13, 6:46 PM
- Warren Buffett (BRK.A, BRK.B) is in on the second round of the auction for the core assets of Yahoo (NASDAQ:YHOO), along with Quicken Loans' Dan Gilbert, according to Reuters' Greg Roumeliotis.
- Yahoo is flat in after-hours action so far.
- Buffett is backing a consortium bidding for the assets that includes Gilbert, sources told the organization.
- Updated 6:55 p.m.: And Yahoo is now up 1.2% after hours.
Tue, Jan. 19, 5:58 PM
- Canadian Pacific Railway (NYSE:CP) files a complaint with the U.S. Department of Justice alleging some of its competitors have worked together to block its attempt to merge with Norfolk Southern (NYSE:NSC).
- "The fact that these major railroads have joined to work so feverishly against CP’s proposal speaks volumes about their concerns regarding the impact the transaction would have on their competitive positions,” CP says in its letter to the DoJ.
- Union Pacific (NYSE:UNP), for one, disputes the allegation, saying “We have communicated with other railroads for the purpose of petitioning the government. We oppose this merger, and we are prepared to discuss our views with the government."
- Related tickers: CSX, BRK.A, BRK.B
Fri, Jan. 15, 5:45 PM
- The U.S. Federal Railroad Administration expects to scrutinize the "significant safety hurdles” that would result from merging any of the major U.S. railroads, the head of the agency tells WSJ, a move that could place another obstacle in the way of Canadian Pacific’s (NYSE:CP) takeover attempt for Norfolk Southern (NYSE:NSC).
- The FRA is not empowered to block railroad mergers, which require approval by the Surface Transportation Board, but it can work with railroads on a “safety integration plan" to ensure safe operations in the case of a merger under largely untested rules put in place in 2001.
- Shippers have been filing letters with the STB to oppose a CP-NSC merger, concerned about potential price increases and service problems; other railroads also oppose the merger, including CSX, Union Pacific (NYSE:UNP) and BNSF (BRK.A, BRK.B).
Wed, Jan. 6, 7:30 AM
- The European Commission has approved Berkshire Hathaway's (BRK.A; BRK.B) planned $32.3B purchase of Precision Castparts (NYSE:PCP).
- The Commission said in a statement that the proposed acquisition would not raise competition concerns given the absence of horizontal overlaps and the limited vertical relationships between the activities of the two companies.
Dec. 11, 2015, 4:45 PM
- Select railroad stocks were an island in the storm today after Bloomberg reported that Berkshire Hathaway's BNSF Railway (BRK.A, BRK.B) is considering making a competing bid for Norfolk Southern (NYSE:NSC).
- While BNSF Executive Chairman Matt Rose does not favor more North American rail mergers, he tells Bloomberg the company would not sit on the sidelines in any fresh dealmaking: “If there is consolidation to be had, we would participate as well.”
- Rose’s remarks raise the prospect of another suitor for NSC, which already has turned down Canadian Pacific (NYSE:CP); CSX, NSC’s larger rival in the eastern U.S., would be “very much in play” if CP succeeded with its effort, Rose says, noting that “we’ve never in this industry just done one merger" at a time.
- In today's trade: NSC +2%, CP -2%, CSX +4.1%, UNP -0.2%, KSU -0.1%, CNI -2.1%.
Aug. 10, 2015, 11:28 AM
- Berkshire Hathaway's (BRK.A -0.7%; BRK.B -0.6%) $37B purchase of Precision Castparts (PCP +19.1%), combined with Berkshire's FQ2 earnings report that showed profit fell 37% due to higher costs at its insurance units, appear to be striking an off note with the company's investors, sending shares lower.
- It's the biggest deal of Warren Buffett's career: BRK is paying $235/share for PCP, a 21.2% premium over Friday's closing price and 18x projected profit over a 12-month period.
- "I'm not crazy about paying $30B for a $1.5B earnings stream of a cyclical company supplying airplane makers," says Jeff Matthews, a principal at hedge fund Ram Partners and author of a book about Buffett.
- Buffett tells CNBC that Berkshire will use $23B of its own cash and borrow ~$10B to fund the deal, which he says will be the last one his firm undertakes for roughly a year as it rebuilds its cash pile.
Aug. 9, 2015, 7:54 AM
- Berkshire Hathaway (BRK.A, BRK.B) is nearing an agreement to buy Precision Castparts (NYSE:PCP), in what could be the conglomerate's largest acquisition ever.
- Given typical premiums, the price tag for the industrial firm, which had a market value of $26.7B as of Friday's close, could exceed $30B.
- Berkshire already owns 3% of PCP, and is its largest shareholder. A deal may be announced as soon as this week.
Jul. 9, 2015, 6:08 PM
- MedPro, a malpractice insurer in the portfolio of Berkshire Hathaway (BRK.A, BRK.B), has agreed to buy rival Plico for cash, and is keeping its eye on other targets as well.
- The deal terms were undisclosed, but with a book value of about $60M (it had $30M in premiums and $60M in surplus premiums last year), Plico likely drew $75M to $90M in the deal. It's MedPro's second acquisition since it became part of Warren Buffett's company in 2005.
- The $28B deal between ACE Limited (NYSE:ACE) and Chubb (NYSE:CB) makes a stronger insurance rival for Berkshire's businesses, but not a real threat as there's little overlap between Chubb's mid-market clients and Berkshire's and Geico's bigger targets, says Morningstar's Greggory Warren.
- Meanwhile, the U.S. has fined Forest River, Berkshire's RV-making unit, $5M for delaying two recalls of camper trailers with defects that posed a fire risk.
- Today: BRK.A +0.8%; BRK.B +1.1%; ACE +0.8%; CB +0.7%.
Jul. 2, 2015, 6:58 PM
- Heinz completes its purchase of Kraft Foods (NASDAQ:KRFT), creating the third largest food and beverage company in North America and fifth largest worldwide, and will begin trading Monday under the ticker KHC.
- Berkshire Hathaway (BRK.A, BRK.B) and Brazilian investment firm 3G Capital, which together bought Heinz in 2013, now own 51% of Kraft Heinz and control six of its 11 board seats, including one for Warren Buffett; Alex Behring, 3G's managing partner, is KHC's chairman.
- KHC will pay a $0.55/share cash dividend on July 31, in lieu of the dividend declared on June 22 by KRFT to its shareholders.
Jul. 1, 2015, 12:30 PM
- "This changes almost everything" in P&C, says KBW's Meyer Shields. "Ace (ACE +2%) is a very experienced and successful acquirer." The deal should help Ace better compete with rivals like AIG (AIG +1%) and Berkshire Hathaway (BRK.A, BRK.B).
- Merger presentation slides
- Unlike some other insurers focused on buybacks - including the acquired Chubb (CB +29%) - Ace and its CEO Hank Greenberg have been using capital for purchases, building scale and diversifying risk.
- Chubb CEO John Finnegan - previously set to retire at the end of 2016 - could be in for a nine-digit golden parachute should he be let go prior to that or resigns for reasons such as a reduction in responsibility or pay. Greenberg is set to lead the combined company.
- Previously: P&C stocks on the move after Chubb sale (July 1)
- Previously: ACE buying Chubb in cash and stock deal for $28.3B (July 1)
Mar. 25, 2015, 6:23 AM
- H.J. Heinz, owned by P-E firm 3G Capital and Berkshire Hathaway (BRK.A, BRK.B), and Kraft (NASDAQ:KRFT) have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America.
- Heinz shareholders will own a 51% stake in the combined company, while Kraft shareholders will hold a 49% stake and receive a special cash dividend of $16.50 per share.
- Together the new company will have eight $1B+ brands and five brands between $500M-$1B.
- "I am delighted to play a part in bringing these two winning companies and their iconic brands together. This is my kind of transaction," said Berkshire Hathaway CEO Warren Buffett.
- 3G previously took Burger King private in 2010, bought Tim Hortons last year through the holding and teamed up with Berkshire Hathaway two years ago to buy Heinz for $23B.
- Kraft’s revenue last year was effectively flat at $18B and net profit fell 62% to $1B, due to higher commodity costs and big charges related to its post-employment benefit plans.
- Previously: Kraft now +16.5% on buyout report; MDLZ, CAG also gain (Mar. 24 2015)
- KRFT +15.8% premarket.
Oct. 22, 2014, 5:57 PM
- Railroad stocks were hammered today after some executives threw cold water on the idea that the railroad industry is ripe for consolidation.
- Norfolk Southern (NYSE:NSC) CEO said during today's earnings conference call that he thinks a major merger would be “highly problematic,” since in the past they have led to "significant service problems for some period of time" and potential cost savings such as overlapping routes do not exist as much anymore.
- Yesterday, Canadian Pacific (NYSE:CP) CEO Hunter Harrison confirmed that talks with CSX fell apart after several meetings because they couldn't agree on key issues, and added that a deal with Kansas City Southern (NYSE:KSU) is unlikely because the stock is expensive.
- In today's trade: NSC -3%, CP -1.6%, CSX -0.6%, KSU -2.7%, UNP -1.8%, GWR -2.6%, CNI -0.9%, BRK.B -0.9%.
Oct. 2, 2014, 8:11 AM
- Van Tuyl Group is the country's largest privately-owned auto dealership group, and the 5th-ranked overall.
- After being folded into Berkshire Hathway (BRK.A, BRK.B), the company will be known as Berkshire Hathaway Automotive, and - no surprise - will continue to be led by its existing management team.
- Buffett: "The Van Tuyl Group fits perfectly into Berkshire Hathaway from both a financial and cultural viewpoint ... [It] enjoys excellent relations with the major auto manufacturers and delivers unusually high volumes at its 78 locations. This is just the beginning for Berkshire Hathaway Automotive."
- The deal is expected to be closed in Q1. Term were not disclosed.
Sep. 25, 2014, 2:29 PM
- Berkshire Hathaway (BRK.A, BRK.B) and CenterPoint Energy (NYSE:CP) are among 10 companies that signed confidentiality agreements to explore bids for Energy Future's Oncor electricity distributor, Bloomberg reports.
- NextEra Energy (NYSE:NEE), which helped prompt the auction with a takeover bid this year valuing Oncor at more than $17.5B, also signed a non-disclosure agreement letting it conduct due diligence.
- The bankrupt Energy Future's profitable Oncor business operates the largest distribution and transmission business in Texas and delivers electricity to more than 3M homes and businesses.
Sep. 12, 2014, 4:37 AM
- Burger King (NYSE:BKW) will meet with leaders next week to discuss a $7.25B loan package, including a $6.75B seven-year term loan and a $500M five-year revolver, to back its $11.5B purchase of Tim Hortons (NYSE:THI).
- The loan, being arranged by JPMorgan Chase, would be the single biggest term loan for an acquisition by a speculative-grade borrower since 2007.
- Berkshire Hathaway (BRK.A, BRK.B) is also providing $3B of preferred equity financing for the transaction.
Berkshire Hathaway, Inc. engages in diverse business activities including property and casualty insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Its insurance and reinsurance business activities are conducted through... More
Industry: Property & Casualty Insurance
Country: United States
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