Is Methanex Next for Buffett?

Includes: BRK.A, BRK.B, MEOH, SOA
by: Market Blog

Here's an interesting thought: Who is one of the world's most powerful chemical barons, eager to expand his empire further? Turns out it's none other than Warren Buffett, who owns Lubrizol (LZ), the Benjamin Moore paints brand and a substantial stake in Dow Chemical Co. (DOW), as its second-largest shareholder.

"Buffett's Berkshire Hathaway (NYSE:BRK.B) will wield enormous influence over a chemical empire that sells materials for Apple's (NASDAQ:AAPL) iPad, lubricants for truck engines, Styrofoam for home construction, and thousands of other products," Reuters reporter Ernest Scheyder points out.

This also has analysts speculating that the Oracle of Omaha may be eyeing specialty chemicals makers, such as Solutia Inc. (NYSE:SOA), which makes insoluble sulphur to stabilise tire rubber, and Methanex Corp. (NASDAQ:MEOH), whose methanol technology may interest Mr. Buffett.

Raymond James analyst Steve Hansen points out that Methanex would be a good strategic fit and also has other characteristics that Mr. Buffett values: A strong competitive moat, powerful free cash-flow generation, and its managers are "good stewards of capital," having bought back half their shares over the past decade.

Solutia has similar market dominance, with 40 per cent margins.

Berkshire Hathaway will have $50 billion to spend by the end of this year.

About this article:

Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here