Category Archives: Acquisitions

Warren Buffett Wishes For Five More Lubrizols

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If there is any one of Berkshire Hathaway’s companies that Warren Buffett would love to find another of it would have to be Lubrizol Corporation.

Berkshire acquired the specialty chemical manufacturer in 2011 for $9.7 billion, and it has played an important role in Berkshire’s profits.

“Lubrizol is the second largest in terms of earnings so it’s a very important asset to Berkshire,” Buffett noted during a recent visit to Lubrizol’s headquarters in Wickliffe, Ohio. “Up until the acquisition of Precision Cast Parts [it was] the largest industrial operation we have.”

Lubrizol’s growth, which since being acquired by Berkshire has included the acquisition of Particle Science, the opening of a chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India, and assuming the Indian government’s stake in Lubrizol India Pvt Ltd., and more.

“It’s a terrific business and it’s big, and only gets bigger,” Buffet said.

With Berkshire size matters, as small acquisitions don’t make much difference in the profits of a company the size that Berkshire has grown to. Over the past decade, Berkshire has added not only Lubrizol, but also BNSF Railway, Precision Castparts, battery-maker Duracell, and a hefty chunk of Kraft Heinz to its portfolio.

While individual Berkshire companies can grow through smaller acquisitions in the millions, tens of millions, or even hundreds of millions, those size acquisitions don’t make sense for Berkshire if they are stand-alone entities. Berkshire has to add companies with billions in market cap in order to make a difference.

Companies of Lubrizol’s size are in the range that Buffett looks for with his famed “elephant gun.”

“It’s a huge advantage to be large too in terms of moving the needle on $400 billion of market cap.” Buffett noted, referring to Berkshire’s overall size.

Buffett’s a willing buyer, but companies such as Lubrizol are not on every corner.

“I wish we had five more and they’re hard, they are very hard to find,” Buffet said. “They take decades and decades to build.”

Buffett’s reputation as a long term owner of companies who keeps key management in place is one the things that makes becoming a Berkshire company attractive. The other is no longer having to be a slave to quarterly earnings reports. Just ask the folks at BNSF Railway how much easier it is to allocate capital now that they have been freed of that burden.

“We want Berkshire to be a wonderful collection of businesses over time, because we’re not going to sell them. It isn’t like we are going to keep culling the herd.”

If you can find Buffett another Lubrizol he’s certainly ready to thank you.

“Find me another Lubrizol, I’ll send flowers to your wife on her birthday,” Buffett adds. And he means it.

© 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: Did the KCC Open the Door for Berkshire to Make a Bid for Westar Energy?

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On April 19, the Kansas Corporation Commission torpedoed the planned acquisition of Westar Energy by Great Plains Energy.

Westar is the largest electric utility in Kansas and the combined companies would have served approximately 950,000 Kansas customers.

The KCC rejected the merger as bad for consumers, and noted what they called an excessive purchase price, requiring GPE to take on significant debt. They noted that the $4.9 billion acquisition premium exceeded GPE’s $4.8 billion market capitalization by $100 million.

With the merger dead, the big question is whether it opens the door for Berkshire Hathaway Energy to make another run at Westar Energy. BHE was in the running the last time around.

Westar Energy is a Natural Fit for Berkshire

With a market cap of roughly $7 billion, Westar is in the same price range as NV Energy, which Berkshire acquired in December 2013 for $5.6 billion.

In addition to just adding to Berkshire’s energy assets, the acquisition makes sense geographically. BHE has already partnered with Westar on Prairie Wind Transmission, LLC, a 108-mile, 345-kilovolt high-capacity electrical transmission line in south-central Kansas that was completed in 2014.

If BHE proves to be interested, it may face competing bids from Ameren Corporation, as well as an investor consortium that includes Borealis Infrastructure Management Inc. and the Canada Pension Plan Investment Board.

Both Ameren and the CPPIB were interested in Westar before the Great Plains merger was signed, and they may again return to the bidding.

Like BHE, Ameren’s service area in neighboring Missouri also fits well with Westar, which provides power for approximately 687,000 customers in much of east and east-central Kansas.

Unlike Great Plains Energy, BHE’s financial strength may enable it to overcome the KCC’s concerns, and add another valuable energy asset to Berkshire’s portfolio.

© 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 Pepsi become a Berkshire Brand?

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It‘s no secret that Warren Buffett is partial to Coca-Cola, after all he not only drinks 5 Cokes a day, but Berkshire Hathaway owns 400 million shares of Coca-Cola stock valued at roughly $16.5 billion.

“I’m one quarter Coca-Cola,” Warren Buffett has joked.

However, with Berkshire and 3G Capital having been rebuffed in their $143 billion bid for Unilever Plc, one important analyst thinks PepsiCo, Inc. might be a logical target for the expansion of Kraft Heinz.

Pablo Zuanic, the Senior Analyst covering the Food, Beverage, and Household/Personal Care sectors for Susquehanna Financial Group, thinks Pepsi might quench Berkshire and 3G’s thirst for acquisitions.

Zuanic’s bona fides as an analyst have seen him recognized by Institutional Investor as the #1 Latin American Food & Beverage analyst for two consecutive years, the #4 US Food Analyst, and the #3 US Food Analyst in their Alpha Poll of Hedge Funds.

PepsiCo, Inc., which has a market capitalization of almost $161 billion, not only has one of the most popular soft drink brands in the world, but also owns snack-maker Frito-Lay and juice company Tropicana.

Zuanic recently raised his Pepsi price target from $118 to $132 on speculation that Kraft Heinz could team with Anheuser-Busch for the bid. The stock is currently just over $112 a share.

It seems logical that a bid for PepsiCo would see the beverages added to Anheuser-Busch, and the snack foods added to Kraft Heinz.

Zuanic notes that in his opinion Pepsi shares trade at a substantial discount when compared to Coca-Cola.

“PEP shares have lost visibility and now trade at a 25% discount to KO on apples-to-apples comps.” writes Zuanic.

While a Berkshire and 3G Capital bid for Pepsi might be a possibility, don’t expect to hear Buffett say “I’m one quarter Pepsi,” anytime soon.

© 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.

Marmon Engineered Components Acquires PRISM Plastics, Inc.

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A subsidiary of Berkshire Hathaway’s Marmon Engineered Components Company has acquired PRISM Plastics, Inc. headquartered in Chesterfield, Michigan.

PRISM Plastics is a manufacturer of high-precision injection molded plastic components with a focus on tight tolerance automotive parts used in safety critical, electronic components, fuel systems products, steering systems and drivetrain components. The company has manufacturing facilities in Chesterfield and Port Huron, Michigan, Meadville, Pennsylvania, and Harlingen, Texas.

The Harlingen, Texas facility is located near Reynosa, Mexico and supports customers with Mexico-based manufacturing.

The company manufactures more than a billion parts per year, and in 2016 PRISM doubled the size of its business through the acquisition of Tech Molded Plastics.

PRISM Plastics was acquired from investment firm Altus Capital Partners, which acquired the company in 2014.

Rod Bricker, President and CEO of PRISM Plastics, stated, “With the financial and strategic resources from Altus, we were able to accelerate growth and stay competitive in an increasingly complex and technology-driven industry. We look forward to our new partnership with Marmon and our continued success.”

© 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 Acquires KITCO Fiber Optics

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Berkshire Hathaway has acquired KITCO Fiber Optics is a leading provider of fiber optic connectorization products and consulting services to the military and commercial communications industry.

Based in Virginia Beach, Virginia, the company specializes in the design and fabrication of fiber optic tools, tool kits and custom cable assemblies; producing private label kits for a number of major connector manufacturers and selling our own broad line of products; field services providing on-site termination, splicing, troubleshooting and testing support, and hands-on training and certification programs.

KITCO was founded in 1997 as a division of Norfolk Wire and Electronics.

The company grew quickly, and in 2002 and 2003 was recognized by the Fantastic 50 as one of the 50 fastest-growing firms in Virginia.

The company’s longtime chairman, W. Sheppard “Shep” Miller III, stepped down upon completion of the sale.

© 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.

MiTek Acquires Wrightsoft

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Berkshire Hathaway’s MiTek Industries has acquired Wrightsoft Corporation, a leading provider of software for residential and commercial energy code compliance and HVAC system design. Wrightsoft is headquartered in Lexington, Massachusetts

“I’m thrilled with the acquisition of Wrightsoft, as this expands our technology leadership into a new area of residential and commercial construction for MiTek: energy load calculation and HVAC system design,” stated Tom Manenti, Executive Chairman of MiTek. “Aligned with our current software platforms, Wrightsoft will provide MiTek a new software extension into this essential aspect of residential and commercial construction. The resources MiTek brings to bear, coupled with Wrightsoft’s deep industry relationships, unique expertise, and proprietary software, will provide unequalled capabilities and efficiencies to MiTek’s growing residential and commercial customer base.”

“We are delighted to welcome Bill Wright and his leadership team to the MiTek family, and we look forward to working with them to continue providing exemplary service to their customers and growing Wrightsoft’s business,” Manenti commented.

Bill Wright, founder and President of Wrightsoft added, “We have successfully partnered with MiTek for a number of years now, and I am excited Wrightsoft has joined the MiTek and Berkshire Hathaway family. MiTek’s values-based approach to leadership combined with its vision of providing unsurpassed, value-added technology to the global residential and commercial construction industry, make this a perfect fit for Wrightsoft and all its employees.”

© 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’s HomeServices of America Acquires Houlihan Lawrence

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In a major acquisition, HomeServices of America, Inc., a Berkshire Hathaway company, has added over a thousand sales associates in the New York Area. HomeServices has acquired Houlihan Lawrence, one of the leading real estate firms serving New York City’s northern suburbs.

Financial terms of the transaction were not disclosed.

Headquartered in the northern suburbs of New York City, Houlihan Lawrence serves the Westchester, Fairfield, Putnam, Dutchess, Orange and Ulster counties of New York and Connecticut with 1,300 sales associates operating in 30 sales offices. In 2016, Houlihan Lawrence closed $6.7 billion of sales volume.

Established in 1888, Houlihan Lawrence has been known to generations of buyers and sellers for its leadership in luxury representation and local expertise delivered by a team of knowledgeable agents coupled with the firm’s renowned advanced technologies and data driven insights. Nancy Seaman will step aside as chairman while her brothers Stephen Meyers, president and CEO, and Chris Meyers, managing principal, will continue to lead the firm’s strategic growth initiatives and manage day-to-day operations together with their sales management teams. Houlihan Lawrence, like other locally-branded brokerage companies under the HomeServices umbrella, will retain its name.

“We are joining an organization known for its strength and stability,” said Stephen Meyers. “Our partnership secures the future of the firm without changing the exceptional culture that is core to our storied brand. We are thrilled with this announcement and the many benefits it brings to our clients and agents.”

“When you combine the incredible strength of our people and the remarkable history of our success with the unsurpassed financial stability of HomeServices, there is no limit to what we can accomplish,” added Chris Meyers.

“Nancy, Stephen and Chris, together with their team of sales managers and agents, have built an extraordinary organization and exemplify a level of expertise and leadership that is second-to-none in the real estate business today,” said Ron Peltier, chairman and CEO, HomeServices. “Their culture of integrity and innovation closely aligns with our corporate vision and our emphasis on customer value and results.”

With this transaction, HomeServices has nearly 29,500 real estate professionals operating in nearly 570 offices across 28 states. In 2016, the company’s associates facilitated more than $93 billion in residential real estate sales.

© 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.

MiTek Acquires DIY Technologies

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Berkshire Hathaway’s MiTek Industries, Inc., a diversified, global business supplying a wide range of engineered products; proprietary business management and design software; and automated equipment to the construction and industrial markets, has acquired DIY Technologies. Terms of the acquisition were not announced.

Headquartered in Tucson, Arizona, DIY is a market leader in web-based design software for a wide range of home improvement and renovation projects.

“I am delighted with the acquisition of DIY, which has an enviable leadership position as a provider of on-line design software to the do-it-yourself, home improvement market. This acquisition is yet another extension of our leading position in technology serving the residential construction industry,” stated Tom Manenti, Chairman and CEO of MiTek. “DIY has established long-term relationships with some of the nation’s largest and most-respected retailers and building-products manufacturers. The combination of MiTek’s software and capital resources, along with DIY’s comprehensive web-based software, will provide unparalleled technology tools that will enhance our customers’ value proposition.”

“We are thrilled to welcome Michael Heisler and his team to the MiTek family and look forward to supporting their business model while expanding their software offerings and services, as we continue to grow DIY’s business,” Manenti commented.

Michael Heisler, CEO and founder of DIY added, “This acquisition is the culmination of more than ten years of successful partnering with MiTek. I am excited that DIY and all our employees have joined the MiTek and Berkshire Hathaway family. I have seen how MiTek truly ‘lives’ its core values, and because of this and its compelling vision of providing unrivaled, highly productive technology to the global residential and commercial construction industry, I know MiTek is the ideal home for DIY.”

© 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.

Richline Group Acquires International Jewelry Manufacturer

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Berkshire Hathaway’s Richline Group, a leading jewelry manufacturer and marketer, has acquired The Aaron Group. No terms of the acquisition were announced.

Since its founding as Samuel Aaron Jewelry in 1950, the Aaron Group has grown from its New York City roots to become a widely renowned, vertically integrated international jewelry manufacturer. Along the way, the Aaron Group has remained a true family business and, under the stewardship of third-generation leader Robert (Bobby) Kempler, has achieved stature as a major global force, with operations, factories, partnerships and hundreds of employees in New York, London, Mumbai, Hong Kong, and Guangzhou.

“We are extremely excited and energized about joining forces with The Aaron Group. The Aaron Group’s differentiated, prime-manufactured products will offer Richline’s retail partners a dramatic new range of options and increased value, while preserving the legacy of customer satisfaction that both companies prioritize,” said Dave Meleski, Richline Group’s President.

Richline’s CEO, Dennis Ulrich, said “this acquisition will allow The Aaron Group to continue as the leader of bridal, three-stone and fashion diamond and gemstone fine jewelry while leveraging Richline’s advanced capabilities across our entire jewelry value chain.”

Per Aaron Group President, Robert Kempler, “Richline Group support will enable The Aaron Group to grow faster, introduce new designs and collections more rapidly, and expand on our history of success by reaching a broader array of customers and markets. Our mutual goal is to anticipate, foster and drive positive change in our industry.”

About The Aaron Group

The Aaron Group is an international jewelry manufacturer with hundreds of employees in offices around the world. A firm believer in the power of jewelry to connect people, The Aaron Group has grown from its 1950 founding as a one-man shop to become globally recognized in the jewelry industry, with an unblemished reputation for quality, value, and commitment to the customer.

© 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.

M&M Manufacturing Snaps Up Snappy Company

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Berkshire Hathaway’s MiTek Industries, Inc., through its subsidiary, M&M Manufacturing, has acquired Snappy Company, a leading supplier of metal duct systems for the residential HVAC market.

Snappy has manufacturing facilities in Detroit Lakes, MN; Medina, NY; and corporate offices in Marietta, GA.

According to MiTek, Snappy will complement M&M Manufacturing, a leading producer of sheet metal products, primarily servicing the air distribution and ventilation markets. M&M Manufacturing will invest in Snappy’s manufacturing capabilities, expertise, and infrastructure.

“We are excited to welcome Snappy in the family of MiTek companies,” stated Tom Manenti, Chairman and CEO of MiTek. “The experience and relationships of Snappy and M&M will be leveraged across all of our manufacturing platforms in order to expand capacity and customer service levels. Combining the manufacturing capacities of M&M Manufacturing and Snappy will allow both companies to better serve our customers and grow in the markets we serve together.”

“Snappy has been a market leader for more than 60 years,” added Rob Felton, President of M&M Manufacturing, “and Snappy’s reputation has been built on a heritage of great customer service, product innovation, and a focus on people. That’s a perfect fit for M&M Manufacturing, and we look forward to leveraging each others’ expertise and capabilities.”

Snappy is a leading supplier of metal pipe and fittings for the residential HVAC market, and the company is recognized for remarkable innovation, quality products, and impeccable service. Since 1955, Snappy has been a trusted resource to HVAC distributors and contractors. With a full line of components that fit together seamlessly and are safe for end users, the company manufactures approximately 4,000 SKUs of galvanized pipe, duct and fittings, as well as complementary accessories, including drain pans, aluminum and venting products.

© 2016 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.