Wednesday, December 26, 2007

Buffett Makes $4.5 Billion Deal With Pritzkers* (BRK.A) AND: How Buffett Made a Killing in Chocolate

From the Wall Street Journal:

Warren Buffett agreed to pay $4.5 billion to buy the majority of an industrial conglomerate from Chicago's Pritzker family, choosing to invest in products like plumbing pipes and railroad tank cars as Asian investors pour billions into U.S. financial institutions.

Mr. Buffett's Berkshire Hathaway Inc. is buying 60% of Marmon Holdings Inc., which has about $7 billion in annual revenue. Berkshire will purchase the rest of the company in stages by 2014, with the final price determined by Marmon's future performance.

According to Mr. Buffett, the deal is Berkshire's largest-ever acquisition outside of the insurance industry. It reflects his fondness for unflashy businesses that deliver steady and strong cash flow, and feature high barriers to entry. Berkshire Hathaway already owns a host of industrial businesses including Johns Manville, a building-products company, and Iscar Metalworking Cos., an Israeli tool maker in which Berkshire took an 80% stake last year for $4 billion....MORE

*Here's one of Mr. Buffett's earliest experiences with the Pritzkers:
How Buffett Made a Killing in Chocolate, And Warren's Letters to Shareholders

...Warren on arbitrage:
Some offbeat opportunities occasionally arise in the arbitrage field. I participated in one of these when I was 24 and working in New York for Graham-Newman Corp.

Rockwood & Co., a Brooklyn based chocolate products company of limited profitability, had adopted LIFO inventory valuation in 1941 when cocoa was selling for 50 cents per pound....MORE