Next Berkshire acquisition speculation

[rb]

This makes no sense to me. Why would they move to delver these assets given BRK's monster credit?

[Cigarbutt]

This makes no sense to me. Why would they move to delver these assets given BRK's monster credit?

i don't see it that way. Let's say BRK buys a (re)insurance entity. They could boost reserves even if they have capital to support the business going forward. It may have to do with financial conservatism a building a goodwill account with regulators.

If you look at BH Energy (see below, page 21 and especially page 14). They are building while deleveraging and retaining capital. This may come handy if a consolidation (like railways, airlines (oups)) of the midstream energy sector is triggered somehow by a higher cost of capital. Building "partnerships" with regulators and credit rating agencies makes a lot of sense from a long term perspective.

https://www.brkenergy.com/assets/pdf/2019-eei-presentation.pdf

[rb]

The problem with that is that while insurance regulators like reserves, utility regulators like leverage. If a wave of consolidation comes in the utility industry there's always that 140 billion bank account at the mothership.

[gfp]

A very large, simple, family owned private business is coming for sale...  Here's hoping Berkshire at least gets a phone call on it before private equity firms leverage it up.

https://www.wsj.com/articles/medline-industries-has-hired-goldman-sachs-to-explore-a-sale-sources-say-11618089846?mod=hp_lead_pos2

https://en.wikipedia.org/wiki/Medline_Industries

[John Hjorth]

Thank you for sharing, gfp,

It certainly appears to be an interesting acquisition candidate for Berkshire. I really can't imagine a company with this kind of activity ever loosing its relevance for societies going forward long term.

It'll be interesting to see what the founding family does here. Is it about maximizing the economic outcome of a sale [where the buyer[s] suck[s] every drop of blood out of it, with the intent afterwards to flip it], or will it be about finding a new good & permanent home for the company, with a new & supportive owner, also willing to support new ventures with capital, if needed.

[StevieV]

I'd love to see BRK add a large holding like this, but my first reaction is that it seems very unlikely.  Medline has hired GS.  I assume they are chumming the waters by mentioning the PE firms.  Also mention a price target of $30B.  I don't know anything about Medline's financials other than the Wikipedia article says they did $11B in sales in 2018.  Only one number, but I'd guess $30B is a rich price.

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

BRK seems to basically stick to their word about not getting into auctions.  I guess the best hope for an acquisition of these guys would entail Medline establishing some type of price range based on the GS work, and then Medline using that estimate to take a price to BRK.  Obviously, they'd only to that instead of an auction if they felt pretty strongly about being owned by BRK.

I could be wrong, but I don't see it.  I don't think this company announces the GS news and then ultimately goes to BRK.

 

-----------

OT: For a company the size of Medline, the Wikipedia page devoted an unusually large amount of space to a $15,000 labor claim.  About half of the entry for the $30B company was related to the $15,000 payout.

[aws]

2 hours ago, StevieV said:

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

 

Possibly the Scott Fetzer deal.  Here's a bit of a write-up about that which gave us a nice Charlie one-liner:

 

 

He told a story about how First Boston (now Credit Suisse) tried to gin up interest in the mid-1980s for Scott Fetzer, a hodgepodge of small businesses based in Cleveland. It called on 30 firms to help make a sale, but failed to find a buyer.

Mr. Buffett then called Scott Fetzer’s chief executive himself and negotiated the deal face to face. Just as they were about to sign the deal, a banker for First Boston said that the bank was still entitled to a $2 million fee. The banker asked Mr. Buffett’s partner, Charlie Munger, whether he’d like to read the firm’s analysis of Scott Fetzer. Mr. Munger replied, “I’ll pay $2 million not to read it.”

[Spekulatius]

12 hours ago, StevieV said:

I'd love to see BRK add a large holding like this, but my first reaction is that it seems very unlikely.  Medline has hired GS.  I assume they are chumming the waters by mentioning the PE firms.  Also mention a price target of $30B.  I don't know anything about Medline's financials other than the Wikipedia article says they did $11B in sales in 2018.  Only one number, but I'd guess $30B is a rich price.

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

BRK seems to basically stick to their word about not getting into auctions.  I guess the best hope for an acquisition of these guys would entail Medline establishing some type of price range based on the GS work, and then Medline using that estimate to take a price to BRK.  Obviously, they'd only to that instead of an auction if they felt pretty strongly about being owned by BRK.

I could be wrong, but I don't see it.  I don't think this company announces the GS news and then ultimately goes to BRK.

 

-----------

OT: For a company the size of Medline, the Wikipedia page devoted an unusually large amount of space to a $15,000 labor claim.  About half of the entry for the $30B company was related to the $15,000 payout.

Marmon was shopped around by Byron Trott from GS (back then) before it end up with Berkshire. Byron Trott is called WEB favorite banker.

https://en.wikipedia.org/wiki/Byron_Trott

[DooDiligence]

2 hours ago, Spekulatius said:

Marmon was shopped around by Byron Trott from GS (back then) before it end up with Berkshire. Byron Trott is called WEB favorite banker.

https://en.wikipedia.org/wiki/Byron_Trott

I wish BRK would've gotten this one. Relatively small, but lots of room to grow.

www.bloomberg.com/news/articles/2019-06-15/bdt-capital-buys-majority-stake-in-texas-staple-whataburger

I think it would be cool if BRK bought BDT.

https://heavy.com/news/2019/06/bdt-capital-partners/

Edited April 12, 2021 by DooDiligence

[StevieV]

Thanks Spek and aws.  Seems like there  is at least some precedent. 

[DooDiligence]

Tangentially interesting,

• Warren Buffett’s conglomerate has no GC, relies on confidantes
• ‘House counsel’ Munger Tolles was paid $105 million since 2005

https://news.bloomberglaw.com/business-and-practice/berkshire-lawyering-buffetts-way-remains-the-munger-tolles-show

Edited April 12, 2021 by DooDiligence

[Mephistopheles]

15 hours ago, aws said:

Possibly the Scott Fetzer deal.  Here's a bit of a write-up about that which gave us a nice Charlie one-liner:

 

 

He told a story about how First Boston (now Credit Suisse) tried to gin up interest in the mid-1980s for Scott Fetzer, a hodgepodge of small businesses based in Cleveland. It called on 30 firms to help make a sale, but failed to find a buyer.

Mr. Buffett then called Scott Fetzer’s chief executive himself and negotiated the deal face to face. Just as they were about to sign the deal, a banker for First Boston said that the bank was still entitled to a $2 million fee. The banker asked Mr. Buffett’s partner, Charlie Munger, whether he’d like to read the firm’s analysis of Scott Fetzer. Mr. Munger replied, “I’ll pay $2 million not to read it.”

lol! where is this from?

[aws]

2 hours ago, Mephistopheles said:

lol! where is this from?

I've seen it a few times but I think it might have first been from the 1999 Berkshire letter

[Castanza]

Atlas Copco (Stockholm Exchange)

 

Stumbled upon this company from a podcast. Sounds like something right up WB alley. Large industrial conglomerate that manufactures compressors and vacuum pumps, 50B mktcap, b2b focused, family run for 150 years, shown resilience and has navigated many tough markets. 

 

 

Edited March 3, 2023 by Castanza

[Spekulatius]

1 hour ago, Castanza said:

Atlas Copco (Stockholm Exchange)

 

Stumbled upon this company from a podcast. Sounds like something right up WB alley. Large industrial conglomerate that manufactures compressors and vacuum pumps, 50B mktcap, b2b focused, family run for 150 years, shown resilience and has navigated many tough markets. 

 

 

I suspect Berkshire may love the business, but not the price. Investor AB also has a significant stake and they are not likely to sell.

[Saluki]

There are a few whales still in private hands but I doubt that Warren is interested. 

 

Mars Candy (and dog food and Banfield Veterniary hospital chain).  The founder, Forest Mars died a few years ago.  The sons who run it seem competent, but that business gene seems to die out after a while (as in See's Candy) so it may be for sale one day. Each of those seems like moaty businesses. 

 

Cargill.  Buffett hates commodity business, but he doesn't seem to mind oligopolies that provide stuff to other companies (Precision castparts, Lubrizol, Paint, Bricks, machining tools). 

 

Koch:  Nope.  

 

PC Richard and Son.  66 store white goods/electronics retailer in the Northeast.  When I worked there in my 20s they had the second highest percentage of customers with a store card (after Sears), which is a great measure of customer loyalty. They also have a large wholesale division that sells appliances to property developers and mom & pop electronics stores. (He's had terrible luck with retail, except for Nebraska Furniture Mart)

 

State Farm is right in their wheelhouse, but it's a mutual insurance company, so I don't think they would agree to be sold. But imagine what he could do with all that float (maybe not much, since cash has been coming in faster than Buffett can send it back out, which is a good problem to have). 

 

ALDI is privately held.  

 

IKEA is private and seems like the kind of differentiated business that he would like.  But...retail.

 

Probably a lot more abroad, but those are the biggest ones that I can think of operating in the US. 

[KPO]

17 minutes ago, Saluki said:

There are a few whales still in private hands but I doubt that Warren is interested. 

 

Mars Candy (and dog food and Banfield Veterniary hospital chain).  The founder, Forest Mars died a few years ago.  The sons who run it seem competent, but that business gene seems to die out after a while (as in See's Candy) so it may be for sale one day. Each of those seems like moaty businesses. 

 

Cargill.  Buffett hates commodity business, but he doesn't seem to mind oligopolies that provide stuff to other companies (Precision castparts, Lubrizol, Paint, Bricks, machining tools). 

 

Koch:  Nope.  

 

PC Richard and Son.  66 store white goods/electronics retailer in the Northeast.  When I worked there in my 20s they had the second highest percentage of customers with a store card (after Sears), which is a great measure of customer loyalty. They also have a large wholesale division that sells appliances to property developers and mom & pop electronics stores. (He's had terrible luck with retail, except for Nebraska Furniture Mart)

 

State Farm is right in their wheelhouse, but it's a mutual insurance company, so I don't think they would agree to be sold. But imagine what he could do with all that float (maybe not much, since cash has been coming in faster than Buffett can send it back out, which is a good problem to have). 

 

ALDI is privately held.  

 

IKEA is private and seems like the kind of differentiated business that he would like.  But...retail.

 

Probably a lot more abroad, but those are the biggest ones that I can think of operating in the US. 

Subway, which is on the block currently due to the co-founders passing, although it’s likely going to be an auction. While it’s the largest restaurant chain in North America, growth has stalled in recent years. I guess it would be interesting at the right price. 

[John Hjorth]

8 hours ago, Castanza said:

Atlas Copco (Stockholm Exchange)

 

Stumbled upon this company from a podcast. Sounds like something right up WB alley. Large industrial conglomerate that manufactures compressors and vacuum pumps, 50B mktcap, b2b focused, family run for 150 years, shown resilience and has navigated many tough markets. 

 

 

 

6 hours ago, Spekulatius said:

I suspect Berkshire may love the business, but not the price. Investor AB also has a significant stake and they are not likely to sell.

 

As mentioned by @Spekulatius,

 

Atlas Copco is indeed for a material part owned - and thereby for practical purposes controlled - by Swedish Investor AB, listed investment vehicle of the Wallenberg family [FAM AB being the private vehicle].

 

Atlas Copco constitutes a material part of Investors NAV, and thereby a cornerstone in the Wallenberg Sphere, together with similar ownership positions in ABB, AstraZeneca & SEB.

 

Just for fun is attached is the Annual Report for the period from the date of foundation of Investor 16^th October 1916 to 31^st December 1917 containing a specification of the shareholdings at YE 1917. You'll at page 3 see two companies mentioned named "Kopparberg" and one named "Atlas Diesel" - predecessors to Atlas Copco.

 

I would be surprised, if Jacob Wallenberg [Investors working chairman] and Mr. Buffett did not know eachother, because they are basically in the same business - you could call Investor AB Swedens Berkshire Hathaway Inc.

1917-investor-arsredovisning.pdf

Edited March 4, 2023 by John Hjorth

[Luke]

Two businesses that i thought were interesting are LEGO and Rolex, both in private hands. Both strong brands with pricing power, sad we cant have access to it. Rolex embedded in a foundation.

Edited March 4, 2023 by Luca

[jbwent63]

1 hour ago, Luca said:

Two businesses that i thought were interesting are LEGO and Rolex, both in private hands. Both strong brands with pricing power, sad we cant have access to it. Rolex embedded in a foundation.

LEGO Group would be an interesting, large addition especially given the recent acquisition of Jazwares (via Alleghany). It is owned (75%) by the founding Kristiansen family with the remainder in a trust. The current Chairman is fourth generation and the company has had a nice turnaround from a decade ago or so (the company I work for bought a small business from LEGO in the early 2000's). Not sure even the 75% would be for sale, but BRK would be a logical place for it to land should the family wish to divest.

[Castanza]

16 hours ago, Saluki said:

Cargill.  Buffett hates commodity business, but he doesn't seem to mind oligopolies that provide stuff to other companies (Precision castparts, Lubrizol, Paint, Bricks, machining tools). 

Always though Kluber Lubrication would be a good addition to Lubrizols portfolio. 

[Castanza]

10 hours ago, John Hjorth said:

 

 

As mentioned by @Spekulatius,

 

Atlas Copco is indeed for a material part owned - and thereby for practical purposes controlled - by Swedish Investor AB, listed investment vehicle of the Wallenberg family [FAM AB being the private vehicle].

 

Atlas Copco constitutes a material part of Investors NAV, and thereby a cornerstone in the Wallenberg Sphere, together with similar ownership positions in ABB, AstraZeneca & SEB.

 

Just for fun is attached is the Annual Report for the period from the date of foundation of Investor 16^th October 1916 to 31^st December 1917 containing a specification of the shareholdings at YE 1917. You'll at page 3 see two companies mentioned named "Kopparberg" and one named "Atlas Diesel" - predecessors to Atlas Copco.

 

I would be surprised, if Jacob Wallenberg [Investors working chairman] and Mr. Buffett did not know eachother, because they are basically in the same business - you could call Investor AB Swedens Berkshire Hathaway Inc.

1917-investor-arsredovisning.pdf 2 MB · 1 download

Thanks for sharing, any good books out there on the family? 

[John Hjorth]

10 minutes ago, Castanza said:

Thanks for sharing, any good books out there on the family? 

 

@Castanza,

 

Here you go : Wallenberg - History [Lower part of the webpage]. It's a fascinating story about the industrialization of Sweden, starting in the 1850s, by a very entrepeneurial family, amassing enourmous wealth already in the beginning of the last century. The Wallenberg family considers themselves industrialists [more than investors], and philantrophists.

 

None of the Wallenberg family members are on any list of wealthy persons, the net worth is encapsuled in now - I think - 16 foundations in total - under family control. All family members generally lay low in the public space.

 

My family and I have owned INVE A for almost a decade now - good ride, seldom material and serious bad news, easy to hold & doing nothing, but still to watch & follow.

 

Too boring for some people, who prefer investing in high-flyers, of which some can't fly, or whatever. Like investing in Berkshire, Investor is the place to learn that investing by compounding is the mere concept of waiting.

 

Compounding made easy by outsourcing, combined with special & attractive tax treatment of Swedish investment holding companies.

 

Be aware of US PFIC status [mentioned by @Jurgis years ago] - I have had no personal interest in pursuing the correct answer to that question].

[John Hjorth]

3 hours ago, jbwent63 said:

LEGO Group would be an interesting, large addition especially given the recent acquisition of Jazwares (via Alleghany). It is owned (75%) by the founding Kristiansen family with the remainder in a trust. The current Chairman is fourth generation and the company has had a nice turnaround from a decade ago or so (the company I work for bought a small business from LEGO in the early 2000's). Not sure even the 75% would be for sale, but BRK would be a logical place for it to land should the family wish to divest.

 

@jbwent63,

 

About LEGO, yes, 25% is foundation owned, but the rest 75% is owned by Kirbi A/S, the privately held investment vehicle [no foundation involvement], which then again is owned by Mr. Kjeld Kirk Kristiansen and his three kids [1/4 each, in a pool].

 

Separate website, Annual Reports available here, certainly not in any way shappy.

 

Kirki A/S is managed by Søren Thorup Christensen, former CFO of A.P. Moeller Maersk A/S and Danish CPA [, like me].

 

Mr. Kjeld Kirk Kristiansen left Billund, Jutland, [the home of LEGO] years ago to to live on a mansion on a pensinsula called Hindsholm on the north-east part of Funen, where I live in the major city of Funen, called Odense, located centrally on island. He has been "giving" back large areas of land belonging to the mansion by leaving it alone instead of growing crops. He is also heavily involved in horse breeding.

 

Junior [Thomas] has been bulding a great and awsome golf resort named Great Northern - [from an economic perspective , simly what appears to be a black hole] - at the town of Kerteminde, about 16 kms from here to the east, south of where his father lives.

[xboojum]

23 hours ago, Saluki said:

Mars Candy (and dog food and Banfield Veterniary hospital chain).  The founder, Forest Mars died a few years ago.  The sons who run it seem competent, but that business gene seems to die out after a while (as in See's Candy) so it may be for sale one day. Each of those seems like moaty businesses. 

 

Cargill.  Buffett hates commodity business, but he doesn't seem to mind oligopolies that provide stuff to other companies (Precision castparts, Lubrizol, Paint, Bricks, machining tools). 

 

Koch:  Nope.  

If I remember correctly, Mars, Cargill, and Koch (not in that order) are three of the five biggest private companies by revenue in the US, the others being the well-run grocery chains Publix (largely based in Florida) and HEB (largely based in Texas).