Category Archives: Acquisitions

Commentary: Buffett Casts His Vote with Dominion Energy Assets Acquisition

(BRK.A), (BRK.B)

With Berkshire Hathaway’s $9.7 billion agreement to acquire Dominion Energy’s natural gas transmission and storage business, Warren Buffett has engaged in a strategy that is familiar to Buffet watchers—the choice between owning a part of a company through equities, or the acquisition of whole companies. It’s a choice that Buffett that has made for almost six decades based on which valuation he judges to be cheaper.

At this year’s annual meeting, Buffett revealed that he had bought relatively few stocks at a time when the market’s plunge had many seeing a rare buying opportunity. Buffett thought differently, and his sale of Berkshire’s entire commercial airline portfolio due to what he felt would be long term profitability issues for United, Delta, American, and Southwest, reflected that perspective.

Now, Buffett has found something he likes. It is an acquisition that makes Berkshire Hathaway a giant in natural gas distribution, vaulting it from carrying 8% of the nation’s natural gas to 18%.

The acquisition adds to one of Berkshire’s core businesses, Berkshire Hathaway Energy, which will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission; and 50% of Iroquois Gas Transmission System. Additionally, Berkshire will acquire 25% of Cove Point LNG – an LNG export, import and storage facility in Maryland.

The acquisition includes over 7,700 miles of natural gas transmission lines, with approximately 20.8 billion cubic feet per day of transportation capacity and 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, and partial ownership of a liquefied natural gas export, import and storage facility.

Demand for natural gas has risen from 4,917,152 million cubic feet in 1949 to 31,014,345 million cubic feet in 2019, according to the U.S. Energy Information Administration. And with the retirement of more and more coal-fired generating plants, natural gas is a key replacement. Even with the enormous growth of wind and solar, new gas-fired plants are being constructed as backup generation for when the winds are calm and the skies are cloudy.

By making this acquisition, Buffett adds key assets to Berkshire Hathaway Energy that will guarantee a pay-off not just in the short term, but for decades to come. And that’s exactly what Buffet likes, putting money to work for decades to come.

This is not to say that Buffett won’t return to buying equities, but for now, he has voted with his dollars that the better deal in the near term is the acquisition of a whole company.

© 2020 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 a 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.

Warren Buffett Nabs Natural Gas Assets from Dominion Energy

(BRK.A), (BRK.B)

Warren Buffett has finally used his famed “elephant gun” on a key addition to Berkshire Hathaway Energy.

Berkshire Hathaway Energy has executed a definitive agreement to acquire Dominion Energy’s natural gas transmission and storage business.

The assets include over 7,700 miles of natural gas transmission lines, with approximately 20.8 billion cubic feet per day of transportation capacity and 900 billion cubic feet of operated natural gas storage with 364 billion cubic feet of company-owned working storage capacity, and partial ownership of a liquefied natural gas export, import and storage facility.

The transaction has an enterprise value of approximately $9.7 billion.

“I admire Tom Farrell for his exceptional leadership across the energy industry as well as within Dominion Energy,” said Warren Buffett, chairman of Berkshire Hathaway. “We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business.”

As part of the transaction, Berkshire Hathaway Energy will acquire 100% of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission; and 50% of Iroquois Gas Transmission System.

The agreement does not include acquisition of the Atlantic Coast Pipeline.

Additionally, the company will acquire 25% of Cove Point LNG – an LNG export, import and storage facility in Maryland. Dominion Energy will continue to own 50% of Cove Point, with Brookfield Asset Management continuing to own the remaining 25% share. Berkshire Hathaway Energy will operate the Cove Point facility once the transaction closes.

The Cove Point export terminal is one of only six LNG export facilities in the U.S.

“This premier natural gas transmission and storage business has been operated and managed in a best-in-class manner,” said Bill Fehrman, Berkshire Hathaway Energy’s president and CEO. “Acquiring this portfolio of natural gas assets considerably expands our company’s footprint in several Eastern and Western states as well as globally, increasing the market reach and diversity of Berkshire Hathaway Energy.”

“We are honored to be gaining a wonderful group of employees with a wealth of experience that will continue to provide high-quality service for our customers and partners. We look forward to welcoming them to the team,” said Greg Abel, Berkshire Hathaway’s vice chairman, non-insurance operations, and Berkshire Hathaway Energy chairman.

“We are fortunate Dominion Energy has entrusted us to preserve and build upon such a remarkable business that will allow Berkshire Hathaway Energy to add $9.7 billion in asset value to the portfolio that currently exceeds $100 billion.”

© 2020 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.

Forest River Acquires REV’s Shuttle Bus Brands

(BRK.A), (BRK.B)

Berkshire Hathaway’s Forest River Inc. has acquired REV Group’s shuttle bus brands: Champion Bus, Federal Coach, World Trans, Krystal Coach, ElDorado and Goshen Coach, adding to the company’s current shuttle bus divisions.

The brands are currently produced at plants in Salina and Imlay City, Michigan.

The bus product line provides transportation for colleges, churches, assisted living facilities, retirement communities, transportation companies and government agencies.

In a press release, David Wright, president of the bus division at Forest River said “We are excited to welcome Champion Bus and ElDorado to Forest River. Both organizations have built a history of integrity, quality and innovation and enjoy an excellent reputation in our industry today. As we navigate these challenging times, the addition of these historic and iconic brands to the Forest River family enhance our ability to provide products and a customer experience that is second to none. We look forward to working with our dealer partners as we better position Forest River’s shuttle bus divisions for the future.”

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway and BYD, and this article is not a recommendation on whether to buy or sell a 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 HomeServices Commonwealth Real Estate Acquires Dooley and Mason Realty Group

Berkshire Hathaway HomeServices Commonwealth Real Estate has announced the acquisition of Dooley and Mason Realty Group, a local real estate firm that has served the region north of Boston for more than 11 years.

Dooley and Mason was launched in February 2008 by realtors Judy Mason and Lisa Dooley, both of whom had more than ten years’ experience before starting their company. For over 11 years, their agency covered not only the North Reading market but more than 25 surrounding towns and cities including Amesbury, Andover, Bedford, Beverly, Billerica, Boxford, Burlington, Chelmsford, Danvers, Dracut, Everett, Georgetown, Haverhill, Ipswich, Lowell, Lynn, Lynnfield, Somerville, Medford, Malden Manchester, Marblehead, Methuen, Middleton, North Andover, Peabody, Reading, Revere, Saugus, Stoneham, Salem, Tewksbury, Topsfield, Wakefield, Wilmington, Woburn, Swampscott and Winchester.
The agency closed nearly 500 transactions and achieved more than $200 million in sales volume.

“As the industry shifted, we realized we needed more to continue to deliver the quality service we were famous for,” said Dooley. “After a thorough search of our options, it became clear that Berkshire Hathaway HomeServices Commonwealth Real Estate was a perfect fit.

“It’s a big company with the small company feel, where everyone pitches in to help. We are so excited to become part of the Berkshire Hathaway HomeServices family. By joining Berkshire Hathaway HomeServices Commonwealth Real Estate, we gain global recognition with a brand that has all the modern tools, technology and resources that we can implement on day one to help grow our business and better serve our customers and clients.”

The two principals and their team will join the Berkshire Hathaway HomeServices Commonwealth Real Estate family at their Reading office located at 360 North Main St. Their team will be known within Berkshire Hathaway HomeServices Commonwealth Real Estate as The Dooley and Mason Realtor Group.

“We’re excited to go forward with the newest members of our growing brokerage,” said George Patsio, founding partner. “Judy and Lisa have done a phenomenal job of building their brand on the North Shore. We are confident that the combination of The Dooley and Mason Realtor Group and Berkshire Hathaway HomeServices Commonwealth Real Estate will be a major force throughout the region.”

© 2020 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.

Johns Manville Acquiring ITW Insulation Systems

(BRK.A), (BRK.B)

Berkshire Hathaway’s Johns Manville has signed an agreement to acquire ITW Insulation Systems, a business owned by Illinois Tool Works Inc. that is well known in the industrial industry for its premium, low-temperature polyisocyanurate foam insulations and metal jacketing solutions.

ITW Insulation Systems has been a division of Illinois Tool Works Inc.

The deal is expected to close in early December.

“The acquisition of ITW Insulation Systems represents an important strategic opportunity to offer expanded insulation solutions to the industrial market,” said JM President and CEO Mary Rhinehart. “This will give us greater versatility and allow JM’s Insulation Systems business to continue to offer a robust and well-rounded portfolio of insulation solutions.”

ITW Insulation Systems has 100 employees who work at four manufacturing plants in the U.S. and Canada (Houston, Texas; La Porte, Texas; Edmonton, Alberta; and Mississauga, Ontario).

ITW Insulation Systems’ primary markets include refining, petrochemical, power, LNG, food & beverage, oil sands and other energy applications.

“There is substantial growth occurring in the cold and cryogenic markets,” said Bob Wamboldt, President of JM’s Insulation Systems business. “We wanted to participate more actively in this space and the product portfolio offered by ITW Insulation Systems allows us to do exactly that.”

JM plans to integrate ITW Insulation Systems as a key part of its industrial insulation portfolio without making significant changes to the existing operations at ITW Insulation Systems.

“JM’s Industrial Insulation business is a market leader, producing the broadest product portfolio of any manufacturer in the industrial insulation industry,” said Dave Skelly, General Manager of Performance Materials at JM. “Historically, this has included high-temperature calcium silicate, expanded perlite, mineral wool, microporous blankets and silica aerogel, and now, with the addition of ITW Insulation Systems, our portfolio includes both low-temperature polyisocyanurate foams and metal jacketing. These additions make our industrial insulation portfolio incredibly robust and allow us to be a single source for our customers’ insulation and jacketing needs.”

© 2019 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 Acquires Provider of Specialty Medical Devices

(BRK.A), (BRK.B)

Berkshire Hathaway’s Marmon Holdings, Inc., has acquired a majority interest in the Colson Medical Companies, a global provider of specialty medical devices, from Colson Associates, Inc.

The purchase price was not disclosed.

Marmon acquired 60 percent of the Colson Medical Companies and will acquire the remaining 40 percent over the next five years.

Colson Associates was founded by the late Robert Pritzker, a long-time Chicago business and civic leader. Mr. Pritzker co-founded Marmon in 1953 and served as CEO until 2002. Upon concluding his five-decade Marmon career, he formed Colson Associates, at which time he acquired the Colson Medical Companies and other businesses from Marmon. He led Colson Associates until his passing in 2011.

Colson Medical provides highly-engineered plates, screws, and related precision tools for orthopedic surgery through its six businesses: Acumed, OsteoMed, MicroAire, Precision Edge, Apex, and Skeletal Kinetics. All but Apex and Skeletal Kinetics were acquired under Marmon between 1979 and 1999. The companies employ more than 1,300 people at locations in the U.S., China, the U.K., Spain, and Germany.

“We are excited to welcome the Colson Medical Companies back home to Marmon,” said Marmon Chairman and CEO Angelo Pantaleo. “Their innovative, proprietary products and processes and outstanding reputation make them an ideal fit for Marmon and provide our organization with another strong growth platform.”

Warren Buffett, Chairman and CEO of Berkshire Hathaway Inc., added: “We couldn’t be more pleased about Marmon’s acquisition of Colson Medical. The specialty medical device market is an attractive growth opportunity and the Colson businesses are highly regarded. Berkshire and Marmon will provide a home where these businesses can continue to flourish.”

The acquired companies will become a new sector within Marmon, led by Colson’s current President, Chris Smith.

“Our dad would be pleased to know that Colson Medical is going back home,” Karen and Linda Pritzker said in a joint statement. “Marmon shares the values and ethics on which Colson Associates was founded and we believe Colson will have the best possible future under Marmon’s ownership.”

Chicago-based Marmon Holdings is a global industrial organization comprising 10 diverse business sectors and more than 125 autonomous manufacturing and service businesses. Revenues exceeded $8.1 billion in 2018.

© 2019 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.

 

Lubrizol Corporation Acquires Bavaria Medizin Technologie GmbH

(BRK.A), (BRK.B)

The Lubrizol Corporation has acquired Bavaria Medizin Technologie GmbH (BMT), an innovative designer and manufacturer of both intravascular (coronary, peripheral, and cranial) and nonvascular devices, including drug-coated balloons, by its German subsidiary Lubrizol Deutschland GmbH from its current majority shareholder Custos Vermögensverwaltungs GmbH as well as from the minority shareholders.

This acquisition builds upon Lubrizol’s expertise in precision thermoplastic extrusion and product development, establishing Lubrizol as a true end-to-end partner to the global medical device and pharmaceutical industries.

With over 100 employees, BMT is headquartered near Munich, Germany and operates a manufacturing facility in Sibiu, Romania. A pioneer in catheter-based technologies, BMT developed the first commercial drug-coated balloon, the Paccocath™ catheter. Today, BMT holds over 50 patents and continues to innovate through self-funded R&D projects, as well as contract R&D services.

Additionally, BMT offers private label manufacturing of proprietary catheters and balloons along with original equipment manufacturing (OEM) services, which include the manufacturing of subassemblies and components, sterilization, packaging and labeling, stent crimping, and logistics management.

The acquisition of BMT expands Lubrizol’s product design, development, and manufacturing expertise and provides access to proprietary catheter and balloon technologies. BMT’s experience and reputation in the drug-coated balloon (DCB) space aligns well with Lubrizol’s pharmaceutical CDMO business and positions Lubrizol as the ideal partner for developing next generation DCBs.

“Lubrizol continues to invest in opportunities that position us as a full-service development partner for innovative OEMs in the interventional space,” said Uwe Winzen, general manager of the Health business of Lubrizol Life Science. “Our customers will benefit from additional design capabilities, an increased global footprint, and synergies with our existing formulation and manufacturing services.”

© 2019 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 Acquires Transco Railway Products

(BRK.A), (BRK.B)

Berkshire Hathaway’s Marmon Holdings, Inc. has announced the acquisition of Transco Railway Products Inc., a railcar repair business with operations across the northern U.S., from Transco Inc. Financial terms were not disclosed.

Chicago-based Transco Railway Products provides railroad tank car and freight car repair and maintenance, auto-rack certification, and hopper car cleaning at seven repair shops located in the Great Lakes region, Iowa, and Montana. The company also provides components to the freight car industry from a fabrication site in Ohio. The business was founded in 1936 as a provider of replacement parts for railcars.

The acquired company will continue to operate as Transco Railway Products within Marmon’s Rail & Leasing sector, whose companies provide railroad tank car manufacturing, leasing, and repair services; intermodal tank containers; in-plant rail switching and loading/unloading services; track installation and maintenance services; and steel tank heads and cylinders for markets including energy, chemical, petrochemical, agricultural, and transportation.

Marmon’s Railcar Repair Services group offers the largest railroad tank car repair and maintenance network in North America.

“We are excited to acquire a company with such a solid reputation in the railcar repair arena,” said Bill Merrill, President of Marmon Railcar Repair Services. “Our goal is to leverage Marmon’s resources to help Transco Railway Products expand its business in both freight and tank car repair.”

Bob Nelson, current President of Transco Railway Products, will continue to lead the business. “We have significantly invested in our repair network over the past several years, allowing us to grow,” Nelson said. “With Marmon’s backing, we look forward to further growth to better serve our existing and new customers.”

Marmon Rail & Leasing is part of Marmon Holdings, a global industrial organization comprising 10 diverse business sectors and more than 100 autonomous manufacturing and service businesses with revenues of more than $8.1 billion in 2018.

© 2019 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.

Clayton Homes Acquires Ninth Site Builder

(BRK.A), (BRK.B)

Berkshire Hathaway’s Clayton Homes, the leading builder of manufactured homes, is quickly becoming a big player in the site built home business. Clayton has acquired Highland Homes, a Florida home builder that is the ninth home builder acquired by Clayton in just three years.

In its 23rd year, Highland, which is based in Lakeland, Florida, is headed by the father and son team, Bob and Joel Adams. Both will be staying on to run the company under Clayton.

The builder will join Clayton Properties Group, a division of Clayton Home Building Group that is based in Maryville, Tennessee.

Highland’s focus is on the low and midprice market, which fits with Clayton’s market approach for its site built homes.

“We are thrilled to join Clayton Properties Group’s family of builders,” said Joel Adams, Highland Homes’ executive vice president, in the statement. “The partnership with Clayton opens up tremendous opportunity for our team members to continue our focus on building high-quality, affordable homes in Central Florida with a strong emphasis on customer experience and market growth.”

Ranked 75th on the 2018 Builder Magazine’s Builder 100 list, Highland built 800 homes in 2018, and is aiming to construct 980 in 2019.

© 2019 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.

Special Report: Kevin Clayton Transforms Clayton Homes

(BRK.A), (BRK.B)

“Would you believe where we are after just three years,” Kevin Clayton, president and CEO of Clayton Homes, says about the company’s move into the site builder business.

It’s a business that Clayton is growing rapidly, and he just acquired Highland Homes in early May, a Florida home builder that is the ninth home builder acquired by Clayton in just three years.

It’s all part of an increasing emphasis on site built homes for the low and midprice market, notes Kevin Clayton.

“It’s a market that has an average price point of $318,000, Clayton says, “which is well under the national average of over $400,000.”

Clayton Homes, which runs its site builders under its Clayton Properties Group, a division of Clayton Home Building Group that is based in Maryville, Tennessee, is already ranked 18th on Builder Magazine’s Builder 100 list and rising fast.

Clayton Homes has been named “Builder of the year” for 2019. It’s an award that really pleases Kevin Clayton.

“To think we weren’t even in that business three years ago,” Clayton says proudly.

Clayton is looking to acquire more site builders, but notes they must meet four criteria.

“First, the owner must be willing to stay around and work,” Clayton says. “Second, they must have survived the last recession; third, they must focus on building low and midprice houses, and fourth, but not least, they must be customer focused and really care about the customer experience.”

Clayton Homes was founded in 1956, by Kevin Clayton’s father Jim Clayton, and Kevin Clayton has led the company since 1999, when he took over from his father.

Acquired by Berkshire Hathaway in 2003 for $1.7 billion, Clayton Homes has grown into a diverse builder offering traditional site built homes, modular homes, manufactured homes, tiny homes, college dormitories, military barracks and apartments.

Improvement in Manufactured Homes

Kevin Clayton is also positive about his manufactured homes business, which he emphasis use the same 30-year shingles as a traditional site built home.

“We don’t have metal roofs anymore,” Clayton says. “Our manufactured homes have a lifespan that’s the same as a site built home.”

Clayton is also building a new type of manufactured homes, for now dubbed New Class Homes, which meet Fannie Mae and Freddie Mac standards. By qualifying, borrowers have lower down payment requirements and lender fees. The homes qualify for a MH Advantage loan, and must be “designed to meet specific construction, architectural design and energy efficiency standards,” according to Fannie Mae.

The move dramatically reduces the amount of down payment borrowers have to come up with. MH Advantage loans require a 3 % down payment, down from 5% previously. In addition, Fannie Mae does not charge its 50-basis-point loan-level price adjustment for manufactured housing loans.

“New Class Homes represent only a couple of percent of our revenues right now,” Kevin Clayton says, but he sees lots of rooms for growth.

The overall manufactured home business is strong.

“The manufactured home business is up 6-7 percent this year,” Clayton says.

Clayton emphasized the environmental advantages manufactured homes, which produce far less waste than traditional site built homes.

“All our 42 facilities are ISO 14001 certified, which is all about environmental standards,” Clayton says.

ISO 14001 is the international standard that specifies requirements for an effective environmental management system.

Clayton has moved much of its supply chain in-house, building more of its own components.

“We build our own windows,” Clayton notes.

Why Consumers Buy Manufactured Homes

It’s a type of housing that opens home ownership to a broad range of consumers that are locked out of housing market as traditional home prices have skyrocketed.

“Fifty percent of people we help with a home would not qualify for Fannie Mae or Freddie Mac mortgages,” Clayton says.

A big part of that access to homes is the greatly lower price point. A manufactured home can be purchased for $69,000 and has an average cost of only $116,000 with land.

“In rural America there’s not a lot of apartment options,” Kevin Clayton notes. “Many of our customers have been living with family, and are looking for an affordable way to live on their own.”

Clayton especially notes the popularity of manufactured homes for five-acre ranches.

“Where there’s land, we shine!”

© 2019 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.