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http://www.bloomberg.com/news/2012-05-05/buffett-shuns-22-billion-deal-to-protect-stock-holdings.html

 

The company has $34 billion in cash and $31 billion in fixed income securities. Both must be earnings fairly unattractive yields or I would assume a much lower rate than the considered acquisition. You also have the possibility of borrowing some funds for the acquisition at ultra low rates.

 

While I understand his concept of a fortress balance sheet, I don't think that making this deal would have jeopardized at all his stated mantra of: "Our cheques will clear".

 

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http://www.bloomberg.com/news/2012-05-05/buffett-shuns-22-billion-deal-to-protect-stock-holdings.html

 

The company has $34 billion in cash and $31 billion in fixed income securities. Both must be earnings fairly unattractive yields or I would assume a much lower rate than the considered acquisition. You also have the possibility of borrowing some funds for the acquisition at ultra low rates.

 

While I understand his concept of a fortress balance sheet, I don't think that making this deal would have jeopardized at all his stated mantra of: "Our cheques will clear".

 

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That's not exactly what I understood.  I think what he was trying to convey is that the deal wasn't so great that it was worthwhile to sell some of his stockholdings to pay for it, although it would have been a better use of capital in this low interest rate period if they had had enough cash available to close it.

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How feasible would it be for Buffett to take a major company in the U.S. from public to private?  For instance ADM is roughly $22 Bln and he has mentioned them as attractive before.  However, that would require board approval... correct?

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Here is a list of publicly traded US/Canadian companies with MV between $18bln and $22bln (sorry for the weird formatting):

 

El Paso Corp. (NYSE:EP) 22,919

Manulife Financial Corporation (TSX:MFC) 22,907

Newmont Mining Corp. (NYSE:NEM) 22,874

State Street Corporation (NYSE:STT) 22,773

Intuitive Surgical, Inc. (NasdaqGS:ISRG) 22,438

BB&T Corporation (NYSE:BBT) 22,056

WellPoint Inc. (NYSE:WLP) 21,921

The Mosaic Company (NYSE:MOS) 21,677

CBS Corporation (NYSE:CBS) 21,564

Johnson Controls Inc. (NYSE:JCI) 21,501

Archer Daniels Midland Company (NYSE:ADM) 21,338

Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) 21,206

McKesson Corporation (NYSE:MCK) 21,087

salesforce.com, inc (NYSE:CRM) 20,905

Coach, Inc. (NYSE:COH) 20,872

Corning Inc. (NYSE:GLW) 20,746

Cummins Inc. (NYSE:CMI) 20,585

Stryker Corp. (NYSE:SYK) 20,521

Teck Resources Limited (TSX:TCK.B) 20,519

Williams Companies, Inc. (NYSE:WMB) 20,459

AFLAC Inc. (NYSE:AFL) 20,325

Discovery Communications, Inc. (NasdaqGS:DISC.A) 20,200

The Chubb Corporation (NYSE:CB) 19,846

Thermo Fisher Scientific, Inc. (NYSE:TMO) 19,845

Spectra Energy Corp. (NYSE:SE) 19,779

FirstEnergy Corp. (NYSE:FE) 19,644

Phillips 66 (NYSE:PSX) 19,199

Rogers Communications Inc. (TSX:RCI.B) 19,161

Broadcom Corp. (NasdaqGS:BRCM) 19,081

Marathon Oil Corporation (NYSE:MRO) 18,874

American Electric Power Co., Inc. (NYSE:AEP) 18,685

Marsh & McLennan Companies, Inc. (NYSE:MMC) 18,613

Ecolab Inc. (NYSE:ECL) 18,557

PG&E Corp. (NYSE:PCG) 18,394

Yahoo! Inc. (NasdaqGS:YHOO) 18,388

Air Products & Chemicals Inc. (NYSE:APD) 18,082

Baker Hughes Incorporated (NYSE:BHI) 18,057

Kellogg Company (NYSE:K) 18,013

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I agree with dcollon.  Although the quotes in the article sound accurate, the discussion was much longer than the three quotes cited would lead one to believe.  I got the impression that the purchase did not work out for other reasons. 

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  • 2 weeks later...

http://www.bloomberg.com/news/2012-05-05/buffett-shuns-22-billion-deal-to-protect-stock-holdings.html

 

The company has $34 billion in cash and $31 billion in fixed income securities. Both must be earnings fairly unattractive yields or I would assume a much lower rate than the considered acquisition. You also have the possibility of borrowing some funds for the acquisition at ultra low rates.

 

While I understand his concept of a fortress balance sheet, I don't think that making this deal would have jeopardized at all his stated mantra of: "Our cheques will clear".

 

Cardboard

 

That's not exactly what I understood.  I think what he was trying to convey is that the deal wasn't so great that it was worthwhile to sell some of his stockholdings to pay for it, although it would have been a better use of capital in this low interest rate period if they had had enough cash available to close it.

 

My recollection is that they could no agree on the terms. (maybe they wanted brk stock or too much money?)

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