Ambassador Bridge

[JEast]

I have wondered for years about the back-story on Berkshire’s selling of their 25% holding of the Detroit International Bridge Company.  What is curious is why Berkshire every sold as it emphasizes one of the biggest moats and comparative advantages available.  Anyone know why/who (Warren or Charlie) sold the position?  Or was it just that Warren was still in the cigar butt stage and flipped it for a quick profit?

 

 

Cheers

JEast

[dcollon]

JEast,

 

This is the man that bought it http://en.wikipedia.org/wiki/Manuel_Moroun.

 

Here's a brief comment from Forbes article:

The Ambassador was privately built in 1929 by a palm reader turned financier, Joseph Bower. It became publicly held when Bower put his company, Detroit International Bridge Co., into bankruptcy in the Depression and issued stock as part of a reorganization. In the late 1970s the sage investor Warren Buffett acquired 25% of the stock, emboldening Moroun to act. In 1979 he used his small trucking company’s credit line to buy out Buffett and acquire the rest of the company for a total of $30 million. Thus it became the only major U.S.-Canada crossing that is privately owned. The bridge’s likely worth today:half a billion dollars or more.

http://www.forbes.com/sites/joannmuller/2012/01/12/why-one-rich-man-shouldnt-own-an-international-bridge/

[DTEJD1997]

Hey all:

 

As a native Detroiter, I have used the Ambassador Bridge, many, many, many times....

 

I can also attest that the Forbes article got it's facts WRONG.

 

A few miles upriver, there is a tunnel from Detroit to Windsor that carries car & truck traffic.  There is also a train tunnel too....

 

That tunnel was a publicly traded company until the 90's.  It paid a tremendous dividend and my family owned a very small chunk of it.  I believe it was eventually bought out by the Ontario government and one of the Detroit pension funds. 

 

That was a real gem that 99.99% of investors never knew about.  I think it's stock traded 1 time a month or so...not really a stock for day traders!  ;D

[JEast]

Thanks for the clarification and maybe the Ambassador Bridge did not (or does not now) have as big as a competitive advantage as I thought. 

 

Still would like to know if it was Warren or Charlie that sold the position though and to the possible reasons why they sold.

[DTEJD1997]

The Ambassador Bridge is certainly an investment gem, no doubt.

 

There are few different ways to get across the border.  You've got the Bridge, tunnel, train tunnel in Detroit.  Until the 80's (90's maybe?) there was a train ferry that carried trains across the river.  It was odd that there was a train tunnel AND a train ferry. 

 

There is also a "truck ferry" that carries hazardous cargo prohibited in the tunnel or on the bridge.

 

Then, about an hour North of Detroit is the Blue Water Bridge that carries trucks & cars between Port Huron & Sarnia.  This bridge got a TON of traffic when there was a problem a few years back at the Ambassador Bridge. 

 

So the Ambassador Bridge is not a monopoly operation, but it is a good toll collector!

 

As an aside, there has been talk for years of building a second bridge one block away from the current Ambassador Bridge.  It is partly a reaction against Mr. Maroun, partly to alleviate traffic, and partly as it is desperately needed.  The Ambassador Bridge is 90 years old!

[augustabound]

 

As an aside, there has been talk for years of building a second bridge one block away from the current Ambassador Bridge.  It is partly a reaction against Mr. Maroun, partly to alleviate traffic, and partly as it is desperately needed.  The Ambassador Bridge is 90 years old!

 

Apparently approval was given in April but now there are lawsuits pending, one of which is from The Ambassador Bridge owners.  ;D

[value-is-what-you-get]

Factoids:  16% of US trade is with Canada.  That's more than China does with US. It's also more than Japan, Germany and UK combined do with the US.

 

One quarter of that trade travels across the Ambassador Bridge.  The bridge is 83 years old and the documentary on it's construction was a silent film!

[fareastwarriors]

http://www.businessweek.com/articles/2012-05-03/matty-moroun-detroits-border-baron

 

 

Read this a while ago. The bridge might be a great investment but I personally feel the owner is an a-hole. He is just protecting his business investment I understand but I think another bridge might be for the greater good in this case.

[DTEJD1997]

yes, it is time for another bridge crossing along the Detroit river.  There has been many a time when traffic is backed up 1/8 mile or so, and you are on the middle of bridge.  It is the middle of winter and you can ice chunks flowing down the river....and the wind is howling, and the damn bridge is swinging.  You can feel it shifting & flexing in your car.  Trucks in the other lane also shake the bridge. 

 

There you sit, at a standstill, waiting for traffic to move.  Then you remember how old the bridge is...and how far down it is into an icy Detroit River....

 

It can work on your nerves, believe me  :-[

 

Yep, time for a new, more modern bridge.  Maybe keep Ambassador primarily for freight, and new one for passengers...

[Uccmal]

Or, you could get rid of US and Canadian customs, which serve no useful purpose, except to insult the intelligence of reasonable people crossing the border.  That would speed up the bridge traffic, and save money in salaries being paid to people to nickel and dime us in sales taxes. 

 

Its not like they actually catch any criminals.  Free trade should include the free movement of goods and labour. 

[DTEJD1997]

Kind off topic....but here is an interesting thing about the northern border.

 

It is MUCH MORE SECURE than the southern border with Mexico.  There are gun boats patrolling the Detroit River.  They are run out of the Coast Guard station near the razed Uniroyal plant on Jefferson.  These things have four 300HP outboard motors and two M60 .30 cal machine guns. (that are visible).  The Northern border is not supposed to be militarized....I could make an argument that this is a breach of the treaty with Canada....

 

There are rumors that drones are also patrolling the river & Lake St. Claire.

 

There are NUMEROUS high powered security cameras watching the entirety of the river.  These things can see for miles.  This is a fact, not rumor.  Homeland security is watching the border 24/7/365.

 

There are also heavily armed border patrols going through downtown Detroit.  I am talking bomb sniffing dogs, and guys with MP5's.  I've seen them personally.

 

So what is the problem we have with Northern Border?  Too many Canadians desperate to get into the USA?

 

Funny how the border we have virtually no problem with is heavily defended.  Meanwhile down here in Texas, the border that we do have PROBLEMS WITH is almost wide open.  I would not be surprised if there are MILLIONS of illegal immigrants in Texas alone.

 

Why is this?  Seems kind of odd.

[MrB]

JEast,

 

This is the man that bought it http://en.wikipedia.org/wiki/Manuel_Moroun.

 

Here's a brief comment from Forbes article:

The Ambassador was privately built in 1929 by a palm reader turned financier, Joseph Bower. It became publicly held when Bower put his company, Detroit International Bridge Co., into bankruptcy in the Depression and issued stock as part of a reorganization. In the late 1970s the sage investor Warren Buffett acquired 25% of the stock, emboldening Moroun to act. In 1979 he used his small trucking company’s credit line to buy out Buffett and acquire the rest of the company for a total of $30 million. Thus it became the only major U.S.-Canada crossing that is privately owned. The bridge’s likely worth today:half a billion dollars or more.

http://www.forbes.com/sites/joannmuller/2012/01/12/why-one-rich-man-shouldnt-own-an-international-bridge/

 

I don't know how accurate this information is, but going from $120m-$500m in 34 years = 4%/annum. Thereby concluding Buffett got offered the right price. Any franchise is for sale at the right price....even Coke..as Buffett alluded to previously...he made a mistake not selling it back in 06/07 I think it was.

Again, assuming the above info is correct, which is a big if.

[twacowfca]

Kind off topic....but here is an interesting thing about the northern border.

 

It is MUCH MORE SECURE than the southern border with Mexico.  There are gun boats patrolling the Detroit River.  They are run out of the Coast Guard station near the razed Uniroyal plant on Jefferson.  These things have four 300HP outboard motors and two M60 .30 cal machine guns. (that are visible).  The Northern border is not supposed to be militarized....I could make an argument that this is a breach of the treaty with Canada....

 

There are rumors that drones are also patrolling the river & Lake St. Claire.

 

There are NUMEROUS high powered security cameras watching the entirety of the river.  These things can see for miles.  This is a fact, not rumor.  Homeland security is watching the border 24/7/365.

 

There are also heavily armed border patrols going through downtown Detroit.  I am talking bomb sniffing dogs, and guys with MP5's.  I've seen them personally.

 

So what is the problem we have with Northern Border?  Too many Canadians desperate to get into the USA?

 

Funny how the border we have virtually no problem with is heavily defended.  Meanwhile down here in Texas, the border that we do have PROBLEMS WITH is almost wide open.  I would not be surprised if there are MILLIONS of illegal immigrants in Texas alone.

 

Why is this?  Seems kind of odd.

 

It's not odd at all.  Canucks are notorious for trying to run contraband maple syrup across the lake in their fast cigarette boats.  Besides, the treaty about demilitarization of the border was obviously intended to work only one way: no Canadian militarization at the border.

 

Actually, this may be a case like solving the mystery of where to reinforce the armor of US bombers that returned to base badly shot up during WWII.  Reinforce them in the places that were shot full of holes, obviously.  Or wait a minute, a physicist said, wouldn't it be better to reinforce the armor of bombers that made it back to base in the places where they were not shot full of holes?

[Uccmal]

Well obviously we cant defend our border from you mighty Americans.  So that leaves us with one choice which is to baffle you with bullshit - therefore Cnd Customs officers.

 

The only question I ever get asked going to the States is where I work.  Go figure.  I must get the guy who was trained at the southern border.

[value-is-what-you-get]

The reason Canada doesn't defend the border with the US is because if the US ever tried to invade us we'd just kick their butts back across the border like the last two times they tried that.

[constructive]

I don't know how accurate this information is, but going from $120m-$500m in 34 years = 4%/annum. Thereby concluding Buffett got offered the right price. Any franchise is for sale at the right price....even Coke..as Buffett alluded to previously...he made a mistake not selling it back in 06/07 I think it was.

Again, assuming the above info is correct, which is a big if.

 

I think Moroun's rate of return was much higher than 4%. My impression was $30M was the cost of the entire business, not just Buffett's stake. It was 25 years, since that article was written in 2004. With $1B in annual revenue, the market price of the business was probably north of $500M. And Moroun may have paid himself dividends along the way.

 

But still, I'd guess the rate of return was significantly lower than Berkshire Hathaway. Hard to beat companies like GEICO and See's.

[fareastwarriors]

So are there any publicly traded toll road/bridge operators trading at modest valuation right now?

[constructive]

So are there any publicly traded toll road/bridge operators trading at modest valuation right now?

 

http://static.seekingalpha.com/uploads/2011/4/17/782337-130305496591435-Clemens-Scholl.png

 

http://markets.ft.com/research/Markets/Tearsheets/Summary?s=SIS:MIL

http://markets.ft.com/research/Markets/Tearsheets/Summary?s=AT:MIL

http://markets.ft.com/research/Markets/Tearsheets/Summary?s=1098:HKG

 

http://seekingalpha.com/article/267316-for-whom-the-road-tolls-reviewing-listed-toll-roads-bridges-and-tunnels

[savant]

So are there any publicly traded toll road/bridge operators trading at modest valuation right now?

 

Noida Toll Bridge Company in India (BSE Code: 532481)