Buffett/Berkshire - general news

[John Hjorth]

Good. I bet Mr. Buffett is really grumpy about this situation, if not straight out furious. Such allways make one think : "Is there more similar [in a broad sense] laying around / going on somewhere in the business?"

[Munger_Disciple]

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

Edited December 13, 2023 by Munger_Disciple

[bargainman]

On 12/13/2023 at 12:52 PM, Munger_Disciple said:

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

Who knows, maybe SpaceX and OpenAI will want a private buy out one day

[DooDiligence]

the Squishmallow Wars

[Eldad]

On 12/13/2023 at 2:52 PM, Munger_Disciple said:

Clearly Buffett mis-judged the character of Haslams when he bought Pilot. Hopefully he will lean into more share buybacks (zero risk) and refrain from buying "family" controlled large businesses in the future. There probably aren't that many out there anyhow. 

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

[CassiusKing1]

Nice price movement for the first couple trading days of the year.

[John Hjorth]

3 minutes ago, CassiusKing1 said:

Nice price movement for the first couple trading days of the year.

 

Is it yet to an extent so we need to have a separate topic to show off our bulging belly buttons?

[keegomaster]

On 12/29/2023 at 7:29 AM, Eldad said:

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

WEB won't change one bit (let alone at his age). He will pull the trigger only when the big elephant is in sight. 

[Eldad]

26 minutes ago, keegomaster said:

WEB won't change one bit (let alone at his age). He will pull the trigger only when the big elephant is in sight. 

I know. Here is hoping for a massive elephant in 2024. 

[xo 1]

On 12/29/2023 at 10:29 AM, Eldad said:

I’ll take Mars and Koch anytime they want to sell. BRK needs to buy something big soon.
Maybe Greg will become the new Charlie and can get him to be a little more proactive than waiting for the phone to ring. 

Agreed.  I have long hoped that the Wrigley financing was a toehold into a Mars acquisition, but I haven't seen much evidence to justify that hope over the past decade.

[alpha]

 

Another Flying J in Kansas received federal funding to install EV chargers. It will be interesting to see how many of the stops qualify for the federal grants and how their electrification strategy develops.

 

https://governor.kansas.gov/governor-kelly-announces-more-than-4-6m-for-six-fast-charging-ev-locations/

[MCR]

No trial on Monday...

 

https://www.reuters.com/sustainability/boards-policy-regulation/court-cancels-warren-buffett-jimmy-haslam-trial-over-pilot-2024-01-07/

[ValueMaven]

Wow ... Berkshire likely settled.  Honestly Pilot was never going to win.  

We should see a press release on Monday AM

[gfp]

4 minutes ago, ValueMaven said:

Honestly Pilot was never going to win.  

Remember that this trial was narrowly focused on the application of push-down acquisition accounting that inflated depreciation and amortization and not any of the "illicit incentive" payments.  

 

If a settlement pushes the Haslam's put exercise out a year, it gives Berkshire's side a change to put up a "clean" year of EBIT to plug into their formula.  Alternatively they could have just agreed on a number to part ways permanently with the Haslams.

[ValueMaven]

This is a decent asset for Berkshire.  Not an amazing one.  I hope they have just settled and push out the Haslams.  

The more I learn about 'Big Jim' - the more I'd rather Berkshire not have done this.  

[John Hjorth]

Isen't there to some degree confusion about the numbers [money sums] involved in the description of the disagreement with the Haslams?

[gfp]

9 minutes ago, John Hjorth said:

Isen't there to some degree confusion about the numbers [money sums] involved in the description of the disagreement with the Haslams?

 

Not sure what you mean here, but there isn't really much disagreement over the number the formula spits out (for the final 20%).  Berkshire had it at $3.23 Billion on their most recent 10-Q and the Haslam family would be happy with that number.

 

I think Berkshire believes, for good reason, that the EBIT that feeds into the formula that spits out the above number has been manipulated and would prefer to plug in a more normalized "un-gamed" EBIT in a year or two.  That was not part of this week's scheduled trial however.

 

The Haslam's suit was mostly just not trusting Berkshire to use the above figure from their 10-Q.  They wanted to know for sure, up-front, that Berkshire was not going to try to screw them, because they are used to living in a world where everybody is trying to screw their partners.  The original contract had dispute resolution protocols for dealing with disagreements over the figure.  The Haslams just wanted a guarantee they would know the exact number before they made a decision to exercise their put.

 

But there is value to putting it behind you and value to minimizing risk to Abel's and Berkshire's reputations.  To Berkshire, I doubt it is predominantly about a further "unjust" $1 billion transfer to the Haslams.  They already got gamed for a bigger figure than that and they knew it.  Chaulk it up to character and incentives and file it with the rest of the lessons learned.

[John Hjorth]

Thank you, @gfp,

 

You are exactly catching the only specific and for the specific case the only tangible figure I've been able to relate to the case for Berkshire.

 

Estimated economic value of the put option, according to BRK 10-Q reporting :

 

BRK 2023Q2 10-Q - "Redeemable noncontrolling interests - USD 3,210 M" [ p. 3 ], &

BRK 2023Q3 10-Q - "Redeemable noncontrolling interests - USD  3,230 M" [ p. 3 ].

 

To me, it's not totally clear what has triggered the Haslams to sue in the first place. Is it something internally processed by the board, or did they expect more than ~ USD 3,2 billion?

 

[yesman182]

4 hours ago, gfp said:

Remember that this trial was narrowly focused on the application of push-down acquisition accounting that inflated depreciation and amortization and not any of the "illicit incentive" payments.  

 

If a settlement pushes the Haslam's put exercise out a year, it gives Berkshire's side a change to put up a "clean" year of EBIT to plug into their formula.  Alternatively they could have just agreed on a number to part ways permanently with the Haslams.

I’m hoping they came up will a price, WEB paid it and we can watch the haslams run their pro teams into last place.  

[ValueArb]

5 hours ago, ValueMaven said:

Wow ... Berkshire likely settled.  Honestly Pilot was never going to win.  

We should see a press release on Monday AM

 

I'd word it "the haslams likely settled". They've got to deal with a legal storm of unintended consequences as their suit unveiled their attempts to manipulate earnings, might as well take what BRK is willing to give them while trying to avoid criminal court.

[Munger_Disciple]

My prediction is that we will see a lot fewer purchases of large "family owned" businesses by Berkshire going forward. With hindsight, Buffett clearly misjudged the character of sellers in this case and wants to put this awful episode it behind him and save Abel time and focus so that he & Abel can focus on more important things. 

Edited January 7, 2024 by Munger_Disciple

[ValueMaven]

The issue isnt that this is family owned.  The issue is that Berkshire didn't acquire all 100% at once.  

[Munger_Disciple]

1 hour ago, ValueMaven said:

The issue isnt that this is family owned.  The issue is that Berkshire didn't acquire all 100% at once.  

The real issue was that Berkshire made a deal with people of questionable character to put it mildly. 

 

Berkshire would have bought of 100% of Pilot at once but 62% of it wasn't available for sale initially. So in effect Berkshire either had to partner with the prior owners (it did) or walk away. 

Edited January 7, 2024 by Munger_Disciple

[MCR]

Pilot settlement...

 

https://link.cnbc.com/public/33922084

[John Hjorth]

BusinessWire [January 7^th 2024] : Berkshire Hathaway Reaches Settlement with Pilot Corporation.

 

Typical Press Release format from Berkshire :

 

Quote

Berkshire Hathaway Reaches Settlement with Pilot Corporation

January 07, 2024 08:41 PM Eastern Standard Time

OMAHA, Neb.--(BUSINESS WIRE)--(BRK.A; BRK.B) – Berkshire Hathaway Inc. is pleased to announce that it has reached an agreement to fully settle the Delaware litigation, including all claims and counterclaims, between Pilot Corporation and Berkshire Hathaway Inc., Pilot Travel Centers LLC, and National Indemnity Company.

 

About Berkshire

Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols BRK.A and BRK.B.

 

Cautionary Statement

Certain statements contained in this press release are “forward looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Berkshire assumes no obligation and does not intend to update these forward-looking statements.

 

Contacts

Marc D. Hamburg
402-346-1400

 

Edited January 8, 2024 by John Hjorth