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Buffett Reveals Terms of Failed Unilever Bid

(BRK.A), (BRK.B)

Berkshire Hathaway and 3G Capital Partners’ recent unsolicited offer for Unilever may have flopped, but it hasn’t soured Warren Buffett on working with 3G on more acquisitions.

The two entities have worked together on the takeover of Kraft to form Kraft Heinz, and Berkshire provided financing for 3G’s merger of Burger King and Tim Hortons that became Restaurant Brands International. The merger made Berkshire a minority owner of the combined company.

At the annual shareholder’s meeting, Buffett detailed that both Berkshire and 3G were prepared to each put $15 billion into the Unilever transaction.

Some in the press have questioned whether 3G’s extreme cost-cutting made the deal unpalatable for Unilever.

While a shareholder questioned whether 3G’s emphasis on layoffs as part of its cost-cutting strategy was in line with Berkshire’s corporate culture, both Buffett and Charlie Munger noted that improvements in productivity have often lead to layoffs.

Munger noted that he doesn’t long for the days of elevator operators, and “We don’t want to go back to the days of subsistence farming.”

While Munger didn’t see a particular “moral fault” in 3G’s strategy, Buffett was clearly sensitive to the impact on displaced workers.

“If you look at any industry, they are trying to get more productive,” Buffett said. Still he noted that society’s improved living standard as a whole can be of little comfort to an individual that has lost their job, and he wishes there could be another way.

Buffett did term 3G’s severance packages at Kraft Heinz “more than fair.”

© 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.