Category: Acquisitions

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Acquisitions

Berkshire Hathaway Acquires Charter Brokerage

(BRK.A), (BRK.B)

Berkshire Hathaway has announced the acquisition of Charter Brokerage from New York-based private equity firm Arsenal Capital Partners.

Charter Brokerage describes its business as “a leading global trade services company providing complete customs, import, export, drawback and related services. Founded in 1994, our mission is to provide full-service and compliance-focused customs services to importers and exporters in the U.S. and Canada.”

In a statement issued by Berkshire Hathaway, Warren Buffett said, “Charter Brokerage is a high quality business with consistently strong financial performance that fits well within Berkshire Hathaway. We are delighted to partner with Bobby Waid, CEO, and its current management team.”

According to the company’s website, Charter Brokerage started as company serving the petroleum and airline industries, It now provides services to a large variety of industries, including chemicals, petrochemicals, biofuels, industrial machinery and equipment, metals and food products.

The company proclaims that “No firm matches our experience with the complex rules that govern the payment of drawback. We recover more duties, taxes and fees for our clients than any other firm.”

No financial details of the acquisition cost were released, but Fortune reported that Charter Brokerage had a valuation in the range of $500 million.

© 2014 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.

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Acquisitions Lubrizol

Lubrizol Continues Acquisitions Spree with Purchase of Two Weatherfield Units

(BRK.A), (BRK.B)

Berkshire Hathaway’s specialty chemical company Lubrizol has inked an agreement to purchase the oilfield chemicals business from Weatherford International PLC.

The acquisition is valued somewhere in the realm $750-$825 million.

The deal is the biggest “bolt-on” acquisition Lubrizol has made since it was acquired by Berkshire in 2011 for $9 billion, and comes only a week after it signed a deal to buy detergent compounds producer Warwick Chemicals, which is headquartered in Mostyn, North Wales.

Continued Expansion

Lubrizol has been on an acquisition spree of late. Only four months ago the company moved into the medical device market by acquiring Vesta Inc., a maker of catheters and tubing based on silicone and thermoplastics based in ranklin, Wisconsin.

Lubrizol’s revenues for 2013 were $6.4 billion, and the addition of the Weatherford units gives it an expanded footprint in the booming oil services business.

Under the terms of the deal, Lubrizol will acquire Engineered Chemistry and its drilling fluids business, known as Integrity Industries.

According to Lubrizol, the addition of these two businesses provide Lubrizol with a more significant footprint in the $20 billion oilfield chemicals business and more importantly, extensive applications experience and end-user relationships.

Engineered Chemistry supplies additives and fluids for a range of oilfield activities, including cementing, drilling, flow assurance and fracturing. It offers chemistry expertise to solve problems throughout the oil and gas drilling process. The business consists of a core manufacturing and research organization which supports a global field distribution network. Engineered Chemistry was built through a series of acquisitions over the past 12 years and is headquartered in Houston, TX. It operates 10 sites located predominantly in North America.

Integrity Industries manufactures drilling fluid systems, including diesel, mineral oil and synthetic oil based fluids. The company supplies these drilling fluid systems to retail drilling fluid companies along with technical support. The business has occupied the same niche for more than 25 years and is recognized as an expert in oil based drilling systems and chemicals serving customers across a large North American footprint. Headquartered in Kingsville, TX, Integrity Industries operates approximately 14 locations.

“This proposed acquisition provides us a new growth platform as we build out a multi-billion business in specialty chemicals and drilling fluids for the oilfield space,” said James L. Hambrick, Lubrizol chairman, president and chief executive officer. “With the addition of the companies’ technologies, combined with improved fluid formulation and applications knowledge, Lubrizol will be better positioned to innovate more quickly and become a solutions provider for both multinational oilfield service companies as well as more regional customers which have a significant share of the North American market.”

The new units will be run under the moniker of Lubrizol Oilfield Solutions.

Increasing Global Manufacturing Capability

In addition to acquisitions, Lubrizol has also been expanding its global manufacturing capability, opening an additives manufacturing facility in Zhuhai, Guangdong, China, in 2013, and breaking ground on a $50 million chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India, in April 2014.

Based in Wickliffe, Ohio, Lubrizol owns and operates manufacturing facilities in 17 countries, as well as sales and technical offices around the world. Founded in 1928, Lubrizol has approximately 7,500 employees worldwide. It sells its specialty chemical products in over 100 countries.

© 2014 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.

Categories
Acquisitions Berkshire Hathaway Automotive

Berkshire Adds $1 Billion in Earning Power With Van Tuyl Group Acquisition

(BRK.A), (BRK.B)

Berkshire Hathaway is getting in the thick of the auto retail business with the acquisition of the Van Tuyl Group. The soon to be rechristened Berkshire Hathaway Automotive will add over a billion dollars in gross profits annually to Berkshire’s bottom line.

Berkshire Hathaway agreed to acquire the auto dealership group for $4.1 billion after company CEO Larry Van Tuyl approached Berkshire and proposed the acquisition.

The Van Tuyl Group is the number one privately-held auto dealership group and is fifth nationally among total dealership groups. The company also serves as a management consulting company that recruits on behalf of a large number of independently owned automotive dealerships.

2013 revenues were nearly $9 billion from 78 independently operated dealerships with over 100 franchises covering Arizona, California, Florida, Georgia, Illinois, Indiana, Missouri, Nebraska, New Mexico and Texas.

The Van Tuyl Group was founded in 1955 by Cecil Van Tuyl with a single Kansas Chevrolet dealership. Joined by his son Larry in 1971, the company is now headed by Larry Van Tuyl, as the current Chief Executive Officer, and Jeff Rachor.

Rachor, who previously headed Fortune 500 auto dealer group Sonic Automotive, and did a stint as the head of auto parts retailer Pep Boys, will take over as Chief Executive Officer for Berkshire Hathaway Automotive. Larry Van Tuyl will continue to manage the company as chairman.

Billions in profit potential

Annual gross profits across the sector in 2013 averaged 15.5%. As a private company, the Van Tuyl Group does not release its annual profits, but they should be around $1.25 billion.

Adding a billion dollars annually to the Berkshire bottom line is only the beginning, as Warren Buffett has already announced that under Berkshire the company will continue to acquire dealerships as it participates in an industry-wide consolidation that has AutoNation and Penske Automotive Group as the sector leaders.

A successful management style

The Van Tuyl Group has incentivized their dealership general managers by making them minority owners of the dealerships. Berkshire is expected to continue this strategy.

One-stop shopping?

Berkshire Hathaway Automotive will likely open up new opportunities for Berkshire to have one-stop shopping for cars, financing and auto insurance.

The acquisition is expected to close in the first quarter of 2015, after clearing regulatory hurdles and gaining approvals from auto manufactures.

(Portions of this article have been updated with new information.)

© 2014 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.

Categories
Acquisitions BH Media

BH Media targets Jersey Shore

(BRK.A), (BRK.B)

Move over Snooki! The Jersey Shore is the latest target for Berkshire Hathaway’s growing newspaper empire.

BH Media Group is continuing its expansion in small and medium-sized markets with the acquisition of the newspapers and publications of the Catamaran Media Group.

Catamaran publishes 12 weekly papers, with circulations ranging from 7,000 up to 15,000, serving the southern New Jersey shore area. While the individual circulations are small, the combined circulations exceed 111,000.

Also, acquired from Catamaran by BH Media Group are the SandPaper and Free-Time publications, which are weeklies covering Cape May, Ocean City and the greater area during the summer tourist seasons. The two publications have a combined circulation of 60,000.

In 2013, BH Media Group acquired a 50% interest in Catamaran when it purchased 100% of The Press of Atlantic City, a daily paper serving Atlantic City, New Jersey. The newspaper has a daily print and online readership of 273,000.

Mark Blum, The Press of Atlantic City’s publisher, will add the duties of publisher of the Catamaran publications to his duties.

Growth Strategy

BH Media Group continues to look aggressively for additional print media properties. It shuns the major markets, with Buffett having shown no interest in bidding for the Washington Post, which went to Amazon’s Jeff Bezos for $250 million in the fall of 2013. Instead, BH Media prefers to pick off the smaller markets that collectively having millions of readers and millions in revenues.

In addition to the publications acquired from Catamaran, BH Media Group owns 69 newspapers and publications located in Virginia, North Carolina, South Carolina, Alabama, Florida, Texas, Iowa, Nebraska, Oklahoma, and New Jersey.

To read a Special Report on BH Media Group’s revenues and acquisition strategies see BH Media Finds Multiples Success.

© 2014 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.

Categories
Acquisitions Marmon Group Special Report

Special Report: Cornelius Acquisition Makes Berkshire Hathaway the World Leader in Beverage Dispensing

(BRK.A), (BRK.B)

Berkshire Hathaway has leapt to the forefront of the beverage dispensing business with the acquisition of Cornelius, Inc.

Cornelius manufactures a complete line of beverage dispensers that are used by leading food service and retail companies, including PepsiCo, Coca Cola, McDonald’s, Yum, Starbucks, and Burger King.

On January 2, 2014, Berkshire Hathaway’s wholly owned Marmon Group closed on the $1.1 billion acquisition of Cornelius, acquiring the company from Birmingham, England-based IMI plc (LON: IMI).

Founded by Richard Cornelius in 1931 in the basement of his Minneapolis home, Cornelius began by making the first diaphragm- type compressor for dispensing beer. Today, the company is headquartered in Osseo, Minnesota, and is the world’s leading supplier of beverage dispensing and cooling equipment.

Cornelius has 4,500 employees, with manufacturing facilities in seven countries, spanning North America, Europe, and China.

Berkshire and Marmon

In 2007, Berkshire Hathaway acquired 60% of Marmon Group for $4.5 billion from the Pritzker Family of Chicago. At the time, Marmon was made up of 125 manufacturing and service businesses that all operated independently within diverse business sectors.

Berkshire has gradually increased its stake in Marmon even as Marmon has grown, and in 2013 it bought the remaining 20% share owned by the Pritzker Family.

Today, Marmon Group has 160 independent manufacturing and service businesses and employs 17,000 people worldwide.

Marmon’s Revenue Growth

According to the 2013 Berkshire Hathaway Annual Report, “Marmon’s consolidated revenues in 2012 were $7.2 billion, an increase of 3.6% over 2011. Consolidated pre-tax earnings were $1.1 billion in 2012, an increase of 14.6% over 2011. In 2012 pre-tax earnings as a percentage of revenues were 15.9% compared to 14.3% in 2011.”

What does the future hold?

The acquisition of Cornelius is all part of the Marmon Group’s continued growth of its Marmon Food Service Equipment businesses, which include Prince Castle, a manufacturer of hot food holding bins, and Silver King, a maker of cold food storage units.

Berkshire and Food Service

One thing is clear, if you are in the fast food business, you are likely dealing with at least one Berkshire holding.

As IMI chief executive Martin Lamb told Bloomberg News “Marmon are in this space, they are buying it to build it, rather than make cuts.”

That buy-hold-build strategy is the heart of the Berkshire Hathaway philosophy.

© 2014 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.

Categories
Acquisitions Berkadia

Berkadia Adds $2 billion to its Loan-Servicing Portfolio with Acquisition of Keystone Commercial Capital

(BRK.A), (BRK.B)

Berkshire Hathway’s joint venture Berkadia Commercial Mortgage has purchased Keystone Commercial Capital.

The acquisition of the Phoenix, Arizona company will add $2 billion to Berkadia’s loan-servicing portfolio, which currently stands at $229 billion.

Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA. The company was among the top Freddie Mac and Fannie Mae multifamily lenders for 2013.

Berkadia was founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation.

© 2014 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.

Categories
Acquisitions Berkshire Hathaway Energy

Berkshire Hathaway Makes Aggressive Move into Canadian Energy Market

(BRK.A), (BRK.B)

With the recently announced acquisition of AltaLink, Berkshire Hathaway’s newly christened Berkshire Hathaway Energy has made an aggressive move into the Canadian energy market.

New Canadian Beachhead Strategy

Under the moniker MidAmerican Energy, the company’s previous Canadian energy plays consisted of joint ventures where the other partners took the lead. Now, as Berkshire Hathaway Energy, the company is going out on its own to become a leader in the growing markets of Calgary and Edmonton, Alberta. It’s a move that will have BHE serving 85% of the population.

In acquiring AltaLink from SNC-Lavalin Group Inc. (TSX:SNC), BHE will take possession of 12,000 kilometers of transmission lines and 280 substations that bring electricity to 3 million Albertans. The total cost of the acquisition is C$3.2 billion, approximately US$2.9 billion.

Warren Buffett has long been known for a buy-and-hold acquisition strategy that places an emphasis on finding companies with top-flight management that is kept in place. Similarly, Berkshire Hathaway Energy, under the direction of chairman, president, and CEO Greg Abel, has the same philosophy. AltaLink’s management will remain headquartered in Calgary, and it will continue to operate as a local, independent company.

Employing the Berkshire Strategy

Also in keeping with another of Buffett’s strategies, Abel’s goal is to buy assets that will be owned forever.

It’s a sizeable acquisition as AltaLink had assets of C$5.9 billion as of December 31, 2013, and generated revenues of C$534.1 million in 2013.

Is this just another acquisition in BHE’s portfolio, or does it represent additional focus on the Canadian energy market?

Apparently, both.

On one hand, it’s a natural move for BHE’s combination of regulated utilities and infrastructure companies that span the U.S. and reach as far as the U.K. and the Philippines. But there’s reason to expect more. Greg Abel hails from Edmonton,  he knows Alberta’s power demands are only going to grow, and he sees AltaLink as a beachhead acquisition.

Alberta’s Growing Power Needs

Industry leaders are already calling for more than 9,400 MW of new thermal power and more than 3,000 MW of new renewable power to fuel future development in Alberta.

Under Abel’s direction, BHE has been growing dramatically, including last year’s purchase of NV Energy that brought 1.3 million customers in Nevada under its wing. In total, BHE has amassed a $70 billion portfolio of energy companies that produced $12.6 billion in revenues in 2013.

A Future Berkshire Leader?

At the youthful age of 51, Greg Abel is often mentioned on the short-list of Buffett successors. He also sits on the board of directors of H.J. Heinz Company board of directors–Berkshire Hathaway’s biggest acquisition since BNSF Railway was acquired in 2010. It’s no surprise his name is on people’s lips, considering BHE’s high-powered growth strategy that has no end in sight. And the Canadian energy market may just be where that strategy leads.

© 2014 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.