Warren Buffett Prevails in Battle with Carl Icahn

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Famed activist investor Carl Icahn has come up short in his battle with Warren Buffett over Occidental Petroleum’s acquisition of Anadarko Petroleum.

The deal closed on August 8, which puts in place Berkshire Hathaway’s funding deal of the takeover.

At the end of April, Buffett announced that Berkshire would invest $10 billion in Occidental in exchange for preferred stock and warrants to purchase common stock. The investment enabled Occidental to top Chevron’s bid for Anadarko.

The deal infuriated Icahn, who castigated Occidental’s CEO and President Vicki Hollub, and railed that “The whole thing is a travesty.”

In exchange for $10 billion, Berkshire Hathaway received 100,000 shares of cumulative perpetual preferred stock with a liquidation value of $100,000 per share and 8% annual dividend. Berkshire can redeem the shares for cash at the option of Occidental in at least 10 years for 105% of the liquidation price, in addition to all dividends.

Berkshire also received warrants to purchase up to 80 million shares of common stock with an exercise price of $62.50 per share, with an expiration date of up to one year after Berkshire redeems its preferred stock.

In a letter to Occidental shareholders written after the announcement, Icahn expressed his displeasure, stating that “Buffett figuratively took her to the cleaners,” and that it was “like taking candy from a baby.”

That may be, but Berkshire will now be receiving 8% for as long as it holds its preferred stock, which looks mighty good in these days of falling interest rates. Berkshire will be receiving $800 million a year, and may make millions more if oil prices rise and make its warrants valuable.

© 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.

Touchdown Home Pros Joins Berkshire Hathaway HomeServices

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Berkshire Hathaway HomeServices, part of the HSF Affiliates LLC family of real estate brokerage franchise networks, has announced that independent brokerage Touchdown Home Pros of Morgantown, West Virginia, has joined its network operating as Berkshire Hathaway HomeServices Touchdown Home Pros Realty.

The brokerage, led by Broker/Owner Lindsay Williams, remains independently owned and operated.

“We are excited to welcome Touchdown Home Pros Realty to our network,” said Gino Blefari, chairman of Berkshire Hathaway HomeServices. “Lindsay and her team are passionate about real estate and the service they provide their clients. They are also community-minded and embrace greater Morgantown through support and volunteerism. We’re eager to help this team grow.”

“We are the same real estate team Morgantown residents know and trust, and now we’re aligned with the Berkshire Hathaway HomeServices brand,” said Williams. “The brand is respected and trusted – just as its Berkshire Hathaway Inc. namesake – and it offers an impressive suite of real estate tools and resources. Morgantown’s finest agents will now be even more effective in the service of local homebuyers and sellers.”

With their brand transition, Touchdown Home Pros Realty agents gain access to Berkshire Hathaway HomeServices’ active referral and relocation networks, and its “FOREVER Cloud” technology suite, a powerful source for lead generation, marketing support, social media, video production/distribution and more. Berkshire Hathaway HomeServices has aligned with Salesforce to deliver world-class technology support to its network members far into the future.

The brand also provides global listing syndication, professional training and ongoing education and the exclusive Luxury Collection marketing program for premier listings. Its Prestige Magazine showcases network members’ premium listings with a strong lineup of feature stories covering topics that appeal to high-end real estate consumers.

“As an independent, I couldn’t afford to provide my agents these varied and important tools, resources and international brand support,” Williams explained. “I knew I needed to join an influential brokerage network and chose Berkshire Hathaway HomeServices.”

Williams said the Berkshire Hathaway HomeServices brand will be warmly embraced by consumers in greater Morgantown. The combination of the brand and her Touchdown Home Pros Realty company name will capture the winning spirit that’s prevalent in and around West Virginia University.

“I’m a graduate of the university and am as passionate as any Mountaineers football fan,” she said. “They call Morgantown ‘Touchdown City,’ where fans follow the Mountaineers as if the team were pros. That’s how I arrived at my Touchdown Home Pros Realty company name, and supported by the Berkshire Hathaway HomeServices network, we can’t be beat.”

“Lindsay Williams is a hall-of-fame-style leader whose love for real estate, and life itself, will keep her team winning for years to come,” said Chris Stuart, CEO of Berkshire Hathaway HomeServices. “Morgantown has a terrific, go-to player in Berkshire Hathaway HomeServices Touchdown Home Pros Realty.”

Berkshire Hathaway HomeServices is one of America’s fastest-growing real estate brokerage franchise networks with more than 50,000 agents and 1,450 offices added to the brand since its launch six years ago including global network members in Berlin, Germany; London, England; Milan, Italy; Dubai, United Arab Emirates; and Madrid, Spain.

© 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.

Commentary: Buffett’s Got the Inside Numbers on Softening Consumer Demand

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Warren Buffett probably knows the current state of the economy better than anyone else in the United States. After all, at any moment he knows how cars are selling at Berkshire Hathaway Automotive, how homes are selling at Berkshire Hathaway Home Services, and how much goods and commodities are shipping at BNSF Railway.

BNSF Railway’s total carloads for 2019 are in a downward trend as compared to 2018 due to a major decrease in intermodal shipping, which is down 5.53% from 2018.

And we already know from Ford’s and General Motors’ earning reports that car sales fell in the second quarter.

Buffett also knows that consumer demand for furniture and home goods continues to soften, as the numbers at his retailers: Nebraska Furniture Mart, Jordan’s Furniture, RC Willey, and Star Furniture show.

In its latest SEC filing, Berkshire Hathaway reported that its sales and earnings from its furniture business were down 3% from the same period in 2018.

“Soft consumer demand,” along with poor weather in parts of the country, were the reasons cited.

Berkshire’s pre-tax earnings for home furnishings for the first six months fell a dramatic 23%, due to higher operating costs and lower sales.

Home furnishings, which include furniture, appliances, rugs, table and chairs, and other home décor, decline in sales when consumers cut back on discretionary spending, delay upgrading, and avoid adding large purchases, as their consumer debt grows.

Berkshire’s Jordan’s Furniture, which is the leading furniture retailer in New England, is already offering 72-month interest free financing in order to prop up sales.

Strong consumer demand, which has long propped up the economy, and kept the longest economic expansion in U.S. history chugging along, may finally be weakening. And Warren Buffett certainly knows it better than anyone.

© 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.

Berkadia Arranges Sale of 360-Unit Apartment Community in San Antonio

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Berkadia, Berkshire Hathaway’s joint venture with Jefferies Financial Group, has arranged the sale of Axio Apartments, a 360-unit garden style apartment community in San Antonio, Texas.

Managing Director Mike Miller, Senior Director Will Caruth, Director Chris Ross and Director Cody Courtney of Berkadia’s San Antonio office represented the seller, Presidium Group, a real estate investment firm based in Texas.

“Axio Apartments exemplifies the upside potential that exists throughout San Antonio’s multifamily inventory,” said Caruth. “With almost 20,000 new residents moving to San Antonio over the past year due in part to its affordability, the demand they bring has elevated rent growth above the national average, making it a compelling market for investors.”

Built in 1982 and renovated in 2016, Axio Apartments is located at 8722 Cinnamon Creek Drive. One-, two- and three-bedroom units feature dishwasher, disposal, range and walk-in closets. Community amenities include fitness center, pool, basketball court, tennis court and volleyball court.

Situated in northwest San Antonio, Axio Apartments is located near major employers and transit routes. The USAA Corporate Headquarters is less than a minute away and South Texas Medical Center is under 10 minutes away. Interstate 10 is about 2 miles away, providing direct access to Interstate 410 and Downtown San Antonio.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation (now known as Jefferies Financial Group), 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.

© 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’s Utilities Saved $19.77 Million in Q2 Thanks to EIM

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Two of Berkshire Hathaway’s utilities, PacifiCorp and NV Energy, saved a combined $19.77 million in the second quarter through the western Energy Imbalance Market (EIM).

The California Independent System Operator (ISO) has released its western Energy Imbalance Market (EIM) 2019 second quarter benefits report that shows total savings have reached $736.26 million since the market’s launch in November 2014.

The benefits for the second quarter reached $86 million for the nine participating members, and the gross benefits for Berkshire’s NV Energy was $4.62 million and PacifiCorp was $15.15 million.

The western EIM platform automatically finds and delivers low-cost energy to serve consumers in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington and Wyoming. Optimizing diverse resources from a large geographic area enables more effective use of carbon-free generation besides reducing costs.

The benefits report estimates the Western EIM reduced CO2 levels by 56,897 metric tons by using surplus renewable energy that otherwise would have been curtailed. Since 2015, the effective use of carbon-free generation from the market has resulted in a gross reduction of 403,546 metric tons of CO2, which is the equivalent of removing the emissions of 84,844 passenger cars driven for one year.

Looking forward, the market continues to grow with benefits anticipated to increase as other participants enter the market. Those future participants include Arizona’s Salt River Project and Seattle City Light in April 2020. Los Angeles Department of Water and Power, NorthWestern Energy, Turlock Irrigation District, and the Public Service Company of New Mexico are slated to begin participation in 2021. Tucson Electric Power in Arizona and Avista, which serves parts of Washington, Oregon, and Idaho, announced plans to participate in 2022.

© 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.of future results.

BYD Tops 100 Double-Decker E-Buses for London

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New energy company BYD in partnership with Alexander Dennis Limited (ADL ) has sold its 100th pure electric double-decker bus for service in London.

On July 27, 2015, BYD announced a joint project worth $29.6 million deal with British bus manufacturer Alexander Dennis Limited to build 51 single-deck zero-emission buses for London.
The buses utilize BYD’s chassis and electric drivetrain with the bodies supplied by ADL.

The partnership helps London move towards its goal of having all single-deck buses totally emission-free by 2020.

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 has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

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

© 2018 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.

Mouser Electronics and XP Power Sign Global Distribution Agreement

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Berkshire Hathaway’s Mouser Electronics, Inc. has signed a global distribution agreement with XP Power, a leading power solutions provider. Through the agreement, Mouser now stocks a wide variety of XP Power’s AC-DC power supplies, DC-DC converters, high-voltage power supplies, and EMI filters.

“With Mouser’s distribution expertise, we can expand our reach while also providing exceptional support and value,” said Steve Head, Global Marketing & Distribution Director, at XP Power. “Leveraging Mouser’s excellent logistics support, we can continue to drive new growth opportunities around the world.”

“We’re very excited to be adding XP Power’s world-class power solutions to our line card,” said Tom Busher, Vice President of Supplier Management at Mouser. “XP Power is well regarded in the industry, and we look forward to a successful partnership.”

The XP Power product line available from Mouser Electronics includes the company’s AC-DC power solutions. Available in a wide power range of 3 W to 3,000 W and in a variety of mechanical formats — including open-frame, chassis mount, DIN rail mount, and wall plug — the products are designed for a wide range of end equipment, including industrial and process control, semiconductor fabrication equipment, medical devices, test and measurement equipment, scientific instruments, consumer devices, and defense applications.

© 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.

Mouser Electronics Opens Customer Service Center in Vietnam

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Berkshire Hathaway’s Mouser Electronics, Inc. today announced the opening of its Vietnam Customer Service Center, in Ho Chi Minh City. This new customer service center, located in the iconic Bitexco Financial Tower, will support local electronic design engineers, buyers and hardware innovators, helping them to locate the newest products for their designs.
Mouser now has 26 service locations worldwide, with 10 locations in the Asia Pacific region.

The electronics industry in Vietnam has seen rapid growth in the past decade and is quickly becoming an important hub for global original equipment manufacturers (OEMs) and electronics manufacturing services (EMS). Ho Chi Minh City, the country’s largest city, hosts many electronics markets and an increasing number of manufacturing services that have spurred demand for electronic components.

“In Vietnam, our business has grown around 180 percent in the last five years,” stated Mark Burr-Lonnon, Mouser’s Senior Vice President of Global Service & EMEA and APAC Business. “We are very excited about this exceptional growth and look forward to providing a local presence to better serve customers throughout Vietnam in local languages and time zones.”

As the global authorized distributor with the newest semiconductors and electronic components, Mouser gives design engineers, buyers and innovators easy access to the newest electronic components and comprehensive design resources. The Services and Tools site, available on Mouser.com, makes it easy for customers to search for products, personalize their orders and access their previous purchases, helping to speed time-to-market. With real-time availability 24 hours a day, 7 days a week, the site’s many resources offer unique capabilities that help customers in their design and creation processes.

Mouser has been offering products and services to engineers across Vietnam through its comprehensive website, Mouser.vn, as well as via phone, email and fax. The new customer support center will better support existing customers while also enhancing Mouser’s overall marketing efforts to serve new customers in the area.

© 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.

Brooks Markets Ice-Cream Inspired Running Shoes

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Berkshire Hathaway’s Brooks Running Company is marketing the Melts Collection to pay tribute to runners’ favorite post-run treats during the summer: ice cream.

New designs inspired by iconic flavors adorn the limited-edition Ghost 12 and Ricochet LE, and became available to runners on July 25.

“Some our favorite runs are under the sun during summer, and we know that many runners, like us, enjoy a cold, tasty post-run treat to cool down,” said Director of Footwear Merchandising Brice Newton. “With the Melts Collection, we give a special nod to those moments by paying tribute to the ice cream and Popsicle flavors we turn to after the miles are in the bank.”

The limited-edition Ghost 12 features a newly engineered mesh as well as a 3D Fit Print upper for a secure fit. The shoe’s BioMoGo DNA and DNA Loft cushioned midsole provide a just-right softness without losing responsiveness and durability. The Segmented Crash Pad, an integrated system of shock absorbers, will cushion every stride and provide smooth heel-to-toe transitions.

The Melts versions of the shoe draw inspiration from crowd-pleasing favorite ice cream flavors like rainbow sherbet and vanilla with sprinkles on women’s colorways. The sherbet colorway features a colorful, swirled midsole, evoking melting ice cream. The vanilla sprinkle colorway has creamy neutral tones and a sprinkle-patterned midsole along with beautiful ombre shoelaces that fade from pink to orange. The men’s offerings channel other crowd favorites including cookies and cream and a rocket pop colorway. The cookies and cream shoe feature chocolate browns and blacks complemented by rich creamy whites. Cookie crumbles speckle the midsole and matching shoelaces. The rocket pop colorway draws inspiration from the popular tri-colored ice pop featuring blue, white and red, which fade from one color to the next on the midsole. The colors pop against the brilliant blue upper.

The Ricochet LE features BioMoGo DNA and DNA AMP cushioning, providing a light, responsive ride to give more energy back to each stride. The flexible, arrow-point pattern on the outsole provides a platform for quick transitions as you quickly move from heel-to-toe. The Melts Collection includes a women’s Ricochet LE in vanilla sprinkles, featuring the design elements of its Ghost 12 counterpart along with a waffle cone-inspired saddle.
The Ghost 12 sells for $130 and the Ricochet LE for $120. The collection went on sale beginning July 25 at brooksrunning.com and at select retailers.

© 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’s CalEnergy Resources Buys Into IOG’s Southern North Sea assets

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Berkshire Hathaway’s CalEnergy Resources Limited (“CER”) has signed a deal with Independent Oil and Gas plc (“IOG”) for a farm out of 50 percent of IOG’s Southern North Sea assets.

Highlights
• IOG has signed binding definitive agreements with CER to farm out 50 per cent of its Southern North Sea assets, comprising all of the Company’s upstream assets (except for the Harvey licences), as well as the Thames Pipeline and associated Thames Reception Facilities (the “Farm-out”).
• The consideration payable by CER comprises:
o £40 million initial cash payment
o up to £125 million by way of a development carry representing 80 per cent of the costs associated with IOG’s retained 50 per cent interest, comprising:
• up to £60 million of development costs for Phase 1
• up to £65 million of development costs for Phase 2
o £0.50/MCF royalty on CER’s interest in Goddard production above 70 BCF gross up to a cap of £9.75 million.
• CER will receive a royalty of 20.2 percent of IOG’s Phase 1 revenues up to a cap of £91 million.
• CER will have the option, within three months of the Harvey appraisal well completion, to farm in to 50 per cent of the Harvey licences in consideration for:
o £20 million additional cash payment
o an uncapped royalty of £0.95/MCF on CER’s net Harvey gas production (equivalent to £61.3 million if Harvey produces IOG’s 129 BCF Best Estimate Prospective Resources).
• IOG and CER have also signed an Area of Mutual Interest (“AMI”) agreement to pursue further business development opportunities in the scope of the Thames Pipeline on a 50:50 basis.
• IOG is planning to issue a Euro-denominated Senior Secured Bond (“Bond”) of approximately £70 million to fund its share of Phase 1 costs. There is no additional external funding requirement expected for Phase 2.
• Upon Farm-out and Bond completion, IOG and CER will submit notice of Core Project Phase 1 Final Investment Decision (“FID”) to the Oil and Gas Authority (“OGA”).
• IOG has also entered into agreements to repay and restructure its existing financing arrangements with London Oil and Gas (“LOG”)
• IOG will retain Operatorship of the Core Project.

The Core Project comprises 410 BCF, of 2P+2C reserves and resources across six discovered Southern North Sea (SNS) gas fields. IOG will pay CER a royalty of 20.2% of its net revenues from the Phase 1 fields only (i.e. 10.1 per cent of gross Phase 1 revenues, net of National Transmission System entry charges and applicable marketing fees), up to a cap of £91 million over field life.

In addition, IOG will receive an effective royalty interest equating to £0.50/MCF on CER’s 50 percent share of production from certain sections of the Goddard Field after 70 BCF gross has been produced from the field up to a maximum royalty of £9.75 million.

© 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