Monthly Archives: October 2017

Commentary: Akzo Nobel and Axalta Coatings Merger Would Benefit Berkshire Hathaway

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A possible merger between Akzo Nobel NV and Axalta Coating Systems would give Berkshire Hathaway a major stake in a world-leader in the coatings market.

The Dutch coatings company Akzo Nobel is reportedly in the discussion stage with Philadelphia-based Axalta on a deal that could create a $30 billion coatings behemoth. The discussions have been described as a “merger of equals’ even though Axalta is the smaller of the two companies.

One of the benefits for Akzo Nobel would be to make it too large for takeover by other coasting companies, including PPG Industries.

The potential merger has already benefited Berkshire, as shares in Axalta soared 17% to Friday’s closing price of $33.15 on news of the discussions.

Berkshire currently owns 23,324,000 shares of Axalta, which is approximately 9.59% of the company, and has a value of roughly $745,668,263. 20 million of its stake was purchased in April of 2015 from The Carlyle Group for an aggregate purchase price of $560 million, or $28.00 per share.

Axalta was founded in 1866 as Herberts, the original producer of Standox paint products. Spun off of DuPont Performance Coatings in 2013, it was sold to The Carlyle Group and renamed Axalta Coating Systems. Today the company is a leader in coatings for commercial vehicles.

When Berkshire took its stake in Axalta back in 2015, the company looked like a possible merger candidate with Berkshire’s Lubrizol. However, Berkshire’s never been shy about owning significant minority stakes in companies if they are purchased at favorable prices.

Such is the case with Axalta.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results

Commentary: Could the Door Open Again for a Berkshire Acquisition of Oncor?

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Berkshire Hathaway’s ongoing interest in acquiring Oncor Electric Delivery might still have a chance, if only a faint one.

Sempra Energy, which this August outbid Berkshire for Oncor, is running into some of the same resistance that torpedoed the last two attempts to acquire what is the largest distribution and transmission system in Texas.

Sempra’s $9.45 billion bid won out after Berkshire refused to get into a bidding war and stood firm on its $9 billion all-cash consideration that implied an equity value of approximately $11.25 billion for 100% of Oncor.

Now, San Diego-based Sempra has to gain the approval of the Public Utility Commission of Texas, and Commissioner Ken Anderson is raising concerns on the amount of money Sempra will have to raise in order to finance the deal and the credit rating of the company.

The PUC has to rule on whether the Sepra deal is in the public’s interest, and on October 5, Moody’s Investors Service issued a comment titled “Sempra Energy: Revised structure for EFH/Oncor acquisition reduces complexity but transaction remains credit negative.”

Credit negative is not the case with Berkshire. Certainly, financing a deal is not a problem for Berkshire, as it is sitting on over $100 billion in cash that it has been hard-pressed to invest as of late.

Commissioner Anderson’s concern is a valid one, as Oncor has been mired in the decade long financial morass that found its parent company Energy Future Holdings Corp. in bankruptcy after being loaded with $40 billion in debt from a leveraged buy-out engineered by private equity firms KKR & Co. and TPG.

While it’s a longshot that Berkshire can get another shot at Oncor, perhaps a very long shot, the one thing Texas ratepayers need at this point is financial stability.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BYD in Talks to Bring SkyRail Monorail to Egypt

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New energy technology company BYD is negotiating to bring its SkyRail monorail to the ancient Egyptian port city of Alexandria, the country’s second largest.

The proposed project will be planned for the construction of a 128 kilometer track. The potential collaboration comes four years after Alexandria local authorities began exploring options to relieve their city of chronic traffic jams.

“Strategic Partnership,” Said General Engineer / Khaled Eleiwa, “BYD has a very strong reputation and reliable image especially in Egypt, we are so glad to have such kind of cooperation step with BYD, and we hope to see the SkyRail operates in Alexandria as soon as possible”.

“BYD’s SkyRail is a clean, affordable and safe way for people to commute. It also utilizes limited road space in towns and cities while minimizing disruption to local communities,” said AD Huang. “Today’s cooperation is a step towards developing wider partnership that we have maintained with Egypt over the past 13 years”.

BYD’s SkyRail is substantially cost saving and quicker to construct compared to a subway, requiring only a fifth of the cost and one third of the construction time. BYD has conducted feasibility studies in more than 100 cities worldwide including the city of Iloilo in the Philippines, and has entered into strategic partnerships with over 10 cities in China. SkyRail is currently operating in Yinchuan, an industrial city in China’s northwest. Construction of BYD SkyRail lines are also expected to begin in 20 cities in 2018.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.8 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BYD Gets Big Order for its New Midibus from Holland’s Connexxion

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Chinese battery and vehicle manufacturer BYD reports that Connexxion has ordered 21 units of its new Midibuses for use in the north part of North Holland. The new fleet will deliver a service in largely rural areas during the daytime.

Delivery of the Midibuses and the start of operation is scheduled in the summer of 2018. The new BYD model takes BYD Europe into a new market sector and augments the BYD ebus range which includes single deckers up to 18m longer, double deckers and an electric coach.

The Midibuses ordered by Connexxion have an overall length of 8.75m, two doors and have seats for 26 passengers (with a total capacity of about 50).

According to BYD, this is believed to be one of the largest orders for heavy duty pure electric midibuses in Europe and is certainly the first significant one to be placed by a Dutch operator.

Eric van Eijndhoven, Managing Director of Public Transport for Connexxion, said: “We chose BYD due to its proven and leading electric bus and battery technology. We are delighted to be the first user of this important new model and know our passengers will enjoy the new levels of green performance the buses will deliver.“

Isbrand Ho, BYD Europe’s Managing Director, said: “This is great news which confirms the attractiveness of our new model which brings big bus features to the midibus sector. This is a real bus with all the reliable, heavy duty features operators expect but smaller than our other ebuses and of course totally emissions free.”

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.8 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

GEICO Lauded with Women Technologists Award

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GEICO, the nation’s second largest and fastest-growing auto insurer, recently earned the prestigious Top Companies for Women Technologists award.

The award recognizes companies committed to building workplaces where women in technology careers can thrive. This year, the presenting AnitaB.org organization evaluated dozens of U.S. companies representing 574,000 technologists across a variety of industries.

AnitaB.org evaluated nominees on the basis of representation, employee experience and programs and policies.

GEICO earned the highest total score for a company with a technical workforce between 1,000 and 10,000. AnitaB.org cited GEICO for a “corporate culture that revolves around promoting diversity and inclusion” and “creating several rotational programs for entry level technologists and management that provide ongoing training for continued professional growth.”

“GEICO has always made diversity a top priority by promoting an all-inclusive environment that emphasizes leadership, training and career-advancing roles for women in IT,” said Marie Motowylak, GEICO director of decision sciences and business transformation. Motowylak accepted the honor on behalf of GEICO and added, “It’s important that we continue to create these opportunities that lead to successful and rewarding career paths.”

GEICO Executive Vice President and CIO Greg Kalinsky said, “Our commitment to innovation and our role in helping GEICO use technology to delight our customers has created incredibly dynamic technology opportunities for our IT associates. They tell me they are more successful and having a bigger impact than they ever dreamed. They are having unexpected careers that they find very rewarding. That’s what we love to see.”

Kalinsky noted, “We think the company’s success in all things digital – from its award-winning website to its best-in-class mobile app – has been aided by having a diverse and committed workforce and presenting associates with dynamic career choices. Our focus on modernizing all systems that support our associates and customers is a testament to the critical role IT plays in our success. I am truly humbled and thrilled for all GEICO associates to be recognized as a Top Company for Women Technologists.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Nebraska Furniture Mart Tops Big Box Retailers on Hot 100 List

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STORES magazine’s Hot 100 Retailers, the annual list ranking the nation’s fastest-growing retailers by year-over-year domestic sales growth, has Berkshire Hathaway’s Nebraska Furniture Mart topping the Big Box retailers rankings.

As proof that retail isn’t dying if you do it properly, Nebraska Furniture Mart was listed at #48 with 8% growth in 2016.

The Home Depot came in at #56; Lowe’s at 78; and Menard’s was on the list at #90.

STORES is the magazine of the National Retail Federation.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Kraft Heinz Buys Cerebos Brands from Suntory

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Kraft Heinz is expanding its brands marketed in Australia and New Zealand with its purchase of the Cerebos food and instant coffee business from Japan’s Suntory Group.

The purchase price will be A$290 million and includes popular brands such as the Gravox gravies, which is one of the all-time great Australian brands, and traces its roots back to 1917.

Cerebos’ Food & Instant Coffee business includes iconic food brands in Australia and New Zealand such as Fountain, Gravox, Saxa, Foster Clark’s, Gregg’s, Bisto, Raro and Asian Home Gourmet. The business has market-leading brands across a number of categories including sauces, gravies, herbs & spices, salt, condiments, Asian sauces, desserts and cooking ingredients.

The sale agreement does not include the Cerebos Fresh Coffee business in Australia/New Zealand, which SBF will retain.

Cerebos Australia and New Zealand is a trans-Tasman integration of two companies, Cerebos (Australia) Limited and Cerebos Gregg’s Limited in New Zealand. Our parent company, Cerebos Pacific Limited, is based in Singapore and has been wholly owned by Suntory Limited, a Japanese global food and beverage group. Within this structure, the companies have operated with a great deal of autonomy.

Kraft Heinz is the fifth-largest food and beverage company in the world and has a strong platform in Australia and New Zealand, with a staple of well-known brands such as Heinz, Kraft, Wattie’s, Eta and Golden Circle in categories including beans & spaghetti, sauces, soups, sauces & dressings and many others.

Bruno Lino, CEO of Kraft Heinz Australia and New Zealand, who will lead the combined business, said: “The transaction provides an exciting opportunity for Kraft Heinz to expand its portfolio into complementary categories, stretching the footprint of Cerebos’ brands into new categories and markets.”

“In addition to the iconic local brands, Cerebos has a strong team that will play an important role in our future growth. This transaction reinforces our commitment and long-term plan to the Australia and New Zealand markets in addition to our significant investment in the Kraft brand for 2018. We will continue investing in our brands, factories and our employees to meet consumer needs and expectations,” he said.

Terry Svenson, CEO of Cerebos Australia/New Zealand, said the company was pleased with the outcome of the transaction.

“As we announced in April 2017, the Food & Instant Coffee business has a number of market-leading brands across Australia and New Zealand and has made significant progress in recent years, particularly in relation to improvements in manufacturing efficiency. However, Food & Instant Coffee is not a core focus category for SBF and we believe this business can be maximised under different ownership. The Food & Instant Coffee business will now have opportunities to leverage Kraft Heinz’s operations to grow the business further.”

The transaction is scheduled to close in the first quarter of 2018, subject to regulatory approvals.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway Specialty Insurance Launches Motor Truck Cargo Legal Liability Insurance in Canada

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Berkshire Hathaway Specialty Insurance (BHSI) today announced that has expanded its inland marine product line in Canada with the launch of its Motor Truck Cargo Legal Liability Policy, a new product that protects against the legal liability exposure commercial truckers face when carrying third party goods.

“This product provides Canadian trucking companies with an insurance offering that responds to their needs in both Canada and the U.S. With the industry evolving, and more trucks crossing the Canada-U.S. border annually, we developed a solution that provides modern coverage and is responsive to both Canadian and American exposures,” said Gord Rider, Senior Underwriter, Marine, BHSI in Canada.

The policy is designed for mid-sized Canadian-based motor carriers specializing in transporting commodities primarily in Canada or cross-border with the U.S. Truckers and cargo are covered anywhere within Canada and the continental U.S.

Key policy highlights include:

• Legal liability coverage regarding property of others while in the ordinary course of transit or while at a terminal location for a specified period of time;

• Cross Docking coverage addressing an insured’s legal liability for direct physical loss or damage to property insured in its care, custody or control during cross docking operations at a scheduled terminal;
• Defence costs coverage that is outside of the policy limit;

• Employee theft coverage with respect to an insured’s legal liability for direct physical loss or damage to property insured resulting from theft by an insured’s employees; and

• Expediting expense coverage, such as reasonable additional labor or overtime costs, fuel costs and freight charges, necessary for timely delivery of the property insured when a vehicle cannot deliver the property due to physical loss or damage to the vehicle, including repair of the vehicle.

BHSI’s new Motor Truck Cargo Legal Liability Policy is the latest addition to its Marine & Inland Marine suite of products in Canada. The portfolio also includes Ocean Cargo, Builder’s Risk, and Contractor’s Equipment products.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkadia Division to Secure Financing for Mixed-Use Project in Downtown San Diego

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A joint venture led by Manchester Financial Group has engaged Berkadia Hotels and Hospitality to source a $650 million construction loan on the Manchester Pacific Gateway development.

The project is situated on San Diego’s waterfront and is the largest undeveloped urban waterfront site on California’s coast. The $1.3 billion project will include 2,823,188 million square feet of hotel, office and retail space in San Diego’s thriving downtown business district.

Berkadia’s Hotels and Hospitality group has been tasked with sourcing a 50 percent LTC non-recourse construction loan that will close by year end 2017. Berkadia Senior Managing Director Andrew Coleman and Managing Director Jackson Cloak will lead the team’s efforts.

Manchester Financial Group has extensive experience in developing convention center hotels and other commercial real estate, having developed more than $2 billion in assets in 11 states, including the Manchester Grand Hyatt San Diego, the 1,360-room San Diego Marriott Marquis & Marina, and the 249-room The Grand Del Mar—California’s only Forbes Triple Five Star resort. The company is currently in construction on the 1,066-room Fairmont convention hotel in Austin, Texas.

The property will include 1,205,490 square feet of office space, 391,231 square feet of retail space, 2,437 parking spaces, a 260-room boutique hotel, and will be anchored by an 1,100-room Four Seasons hotel.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Duracell PowerForward Team on the Ground in Puerto Rico

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Duracell’s PowerForward teams are on the ground in Puerto Rico. The emergency response teams give out thousands of batteries and provide charging stations through their specially outfitted vehicles.

The vehicles wiil deliver $1 million worth of batteries, making this the program’s largest deployment to date.

Since 2011, Duracell PowerForward has been helping affected communities across the country by distributing free Duracell batteries, charging mobile devices, and providing Internet access to those in need so they can connect with family. They have given out over 463,000 batteries in 30 deployments
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The Duracell PowerForward fleet consists of five trucks, custom-designed to handle specific disasters, and strategically stationed to get to any U.S. location within 24 hours. Each one is equipped with mobile charging stations and stocked with thousands of Duracell batteries.

In Puerto Rico, Duracell has deployed two of its highest capacity vehicles. The Heavy Haulers pull trailers that help them transport over 100,000 AA batteries – more than any other vehicle in the fleet. Normally, one is stationed in San Francisco, California while another is kept in Portsmouth, New Hampshire. These trucks specialize in handling earthquakes, floods, landslides, wildfires, hurricanes and winter storms.

“We at Duracell have been deeply moved by the resilience of those in Puerto Rico. Through our PowerForward initiative, a program I am most humbled and proud to be a part of, we will be distributing more than $1 million worth of batteries to local residents over the next month or more,” said Ramon Velutini, Vice President of Marketing at Duracell. “Trusted power is absolutely critical following widespread power outages caused by storms like Hurricane Maria, and we will be offering free Duracell batteries to help residents stay safe and connect with their loved ones by powering mobile devices, radios and flashlights, and providing trusted power for critical medical devices like dialysis machines, hearing aids and ventilators.”

© 2017 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.