Category: Marmon Group

Categories
Marmon Group Special Report

Special Report: Breakthrough Aims to Change the Way You Drink Milk

(BRK.A), (BRK.B)

Go into any quick service restaurant and you will find machines dispensing soda and noncarbonated beverages, such as lemonade or fruit punch, but don’t expect them to be dispensing milk. The problem is that milk ships in bulky cartons, must be kept refrigerated, and has a limited shelf-life. It’s a problem that has vexed dairy producers and retailers alike.

That’s All About to Change

Cornelius, Inc. and Dairyvative Technologies, a Wisconsin-based developer of a patented process that allows pasteurized milk to be concentrated to a liquid that has one seventh of its original volume, are looking to change the way milk is shipped, stored, and dispensed.

Cornelius has signed a strategic partnership agreement with Dairyvative that makes Cornelius the exclusive provider of equipment to hold and dispense the concentrated milk provided by dairies using Dairyvative’s patented SEVENx technology.

One of the newest members of the Berkshire Hathaway family, Cornelius was acquired for $1.1 billion on January 2, 2014, by Berkshire’s wholly owned Marmon Group.

With 4,500 employees, and manufacturing facilities in seven countries, spanning North America, Europe, and China, Cornelius provides beverage dispensing technology to leading food service and retail companies, including PepsiCo, Coca Cola, McDonald’s, Yum, Starbucks, and Burger King.

All of these companies and more are potential customers for Dairyvative’s new technology.

A Whole New Way to Store Milk

Dairyvative claims its SEVENx technology “allows pasteurized milk to be concentrated to a liquid that has one seventh of its original volume. The lactose-free end product is shelf-stable without refrigeration for up to 6 months. The process also keeps milk proteins intact, maintaining nutrient and flavor profiles.”

Unlike milk treated with Ultra-high temperature processing (UHT), SEVENx technology has relatively minimal thermal treatment by comparison.

“I have been working on this process for 28 years,” said Dr. Charles E. Sizer, founder and CEO of Dairyvative Technologies. “There have been a lot of hurdles in maintaining the functionality and freshness of the product.”

One of the first markets for the SEVENx technology will be in quick service restaurants, where using Cornelius’s dispensing technology, the new dispenser will allow individual consumers the choice of adding several different flavors to the milk. Cornelius’ technology also enables the milk to be carbonated during dispensing.

Looking for a World Leader

“We knew Cornelius is the leader in dispensing products, so we approached them and signed an exclusive deal,” Dr. Sizer explained.

While Dairyvative touts the concentrated milk as having the “natural fresh taste of milk,” it does note that it is slightly sweeter due to the conversion of lactose into the sugars glucose and galactose.

Dairyvative also says that the cost for dairy processors to produce the concentrated milk is low, as much of the equipment that processors need they already have in place. They also note that the long shelf-life means less spoilage and returns, lower transportation costs, and environmental benefits such as less electricity needed for milk storage.

Reducing the Carbon Footprint

Reducing the carbon footprint is very important to Dr. Sizer. He notes that currently it takes 2.05 kilos of carbon to bring 1 kilo (1 liter) of milk to the consumer.

“We can reduce that by 20%-30% right out of the gate,” Dr. Sizer said. “And by locating in close proximity to the dairy, we can reduce it even further.”

Expect to see the U.S. rollout of the new milk product in 2016, and Dairyvative is already in discussion with multi-national dairies for international markets.

© 2015 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
Marmon Group UTLX

New Tank Car Standards Means New Facility and Employees for UTLX

(BRK.A), (BRK.B)




Berkshire Hathaway’s wholly-owned tank car manufacturer UTLX is opening a new facility in Marion, Ohio, and will be adding 200 new employees over the next three years. The expansion will double the number of employees it has in Marion.

The move comes as new federal safety standards have created unprecedented demand for new and retrofitted tank cars.

Retrofitting the Existing Fleet

Under the Enhanced Standards for New and Existing Tank Cars for use in an HHFT— Existing tank cars must be retrofitted in accordance with the DOT-prescribed retrofit design or performance standard for use in an HHFT.

An HHFT is defined as a train carrying 20 or more tank carloads of flammable liquids (including crude oil and ethanol).

The need for replacement and retrofitted tank cars impacts shippers that ship by rail, including shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies, and Berkshire’s BNSF Railway’s own fleet of tank cars.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units. 

The new facility is be able to rewrap 60 tank cars a week when it reaches full capacity.

 A Bundle of Tax Credits and Grants

The Ohio Tax Credit Authority granted a 55-percent, 5-year tax credit to UTLX for the creation of $8,272,000 in new annual payroll, provided that the company maintains operations at the facility for 11 years.

The company will also receive a $75,000 grant from the Ohio Rail Development Commission to cover the cost of on-site rail improvements.

Greg Cieslak, president of UTLX, noted, “We have a quick need to expand into a second facility due to the industry’s changing landscape, and found the Columbus Region to be a strategic location to grow. The area offers access to the right workforce and real estate to fit our needs, and the Midwest location and rail infrastructure are convenient to our customers.”

Higher Paying Job Opportunities

The new employees will earn between $15 to $21 per hour plus benefits. The jobs include welders and fabricators, tank car repairers, rail car switchmen, material handlers, and general labor and helpers with general welding knowledge.

UTLX is looking to the Tri-Rivers Career Center’s workforce development program to provide training for the new employees.

© 2015 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 Commentary Marmon Group

Commentary: Is Now the Time for Berkshire to Pull the Trigger on USG?

(BRK.A), (BRK.B)




With demand for housing finally outstripping supply in a number of markets, the need for drywall and other construction supplies looks finally to be reviving from the lingering doldrums of the Great Recession.

Building permits for new houses rose a stellar 30-percent in June 2015, as compared to the same time period in 2014.

The rise in new housing starts, which are up 26-percent year-to-year, is certainly welcome news for Berkshire Hathaway’s Johns Manville, which makes insulation and roofing products, and it’s good news for many of Berkshire’s Marmon Group companies that manufacture materials used in both commercial and residential construction.

The revival in new housing is also great news for USG Corporation (formerly known as United States Gypsum Corporation), which is North America’s leading manufacturer of drywall and related building products.

About USG

In 1902, 30 independent gypsum rock and plaster manufacturing companies merged to form the United States Gypsum Company.  Over more than a century, USG has been issued 1,100 patents for its products. In addition to drywall, the company is a leading manufacturer of acoustical panel and specialty ceiling systems. The company has 34 manufacturing plants in the U.S., and has roughly 9,000 employees in more than 30 countries.

USG and Berkshire

Berkshire played a key role in saving USG during the nadir of the Great Recession.

In 2008, with the housing market imploding and lending all but frozen, Berkshire came to USG’s rescue with $300 million of convertible notes that paid Berkshire 10-percent interest.

At the time, the boost in confidence the company received from Warren Buffett’s financing helped the company avoid bankruptcy. The day of transaction the stock soared 22-percent to $6.89 a share.

Today, the stock is hovering around $29 per share.

Berkshire has not only profited from the healthy interest payments, but the stock’s appreciation as well.

In December 2013, Berkshire exchanged $243.8 million of the convertible notes for common stock, and with additional purchases its stake in USG now sits at just under 40-percent.

The Chinese Drywall Scandal

As an American manufacturer, USG has been a beneficiary of the Chinese drywall scandal that came to a head in 2009. Imported drywall from China that had high sulfur content brought reports of fumes that created upper respiratory problems, and the market for drywall from China was hit hard. Thousands of homes in Florida and other states had their drywall ripped out and replaced.

Time to Pull the Trigger?

The Chicago-based company has seen its ups and downs, including three bankruptcies.

The last bankruptcy was in July 25, 2001 under Chapter 11 in order to deal with a mountain of asbestos litigation costs related to asbestos containing joint compounds.

The establishment of the The United States Gypsum Asbestos Personal Injury Settlement Trust put the company’s asbestos woes in the rear-view mirror, and its stock price reflects it. With the growing strength in the new housing market, its roughly $29 share price looks poised to move past the 5-year high of $35.33 that it hit in February 2014.

With a Market Cap of just over $4.2 billion ($1.5 billion of which is already owned by Berkshire), USG is a great fit for Berkshire if it wants to gobble up the whole thing, or if it just wants to continue its incremental takeover by moving to over 50-percent ownership.

USG would fit nicely into the Marmon Group of companies, which include a host of companies that supply the construction industry.

Berkshire might want to consider a tender offer for the company’s outstanding stock, because it just looks to get more expensive from here, as the housing market finally has put the drywall business back in high demand.

All it takes is a little cash, which is something Berkshire’s got a lot of.

© 2015 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
Marmon Group

Owl Wire Rehabs Manufacturing Plant

(BRK.A), (BRK.B)




Owl Wire and Cable, a unit of Berkshire Hathaway’s Chicago-based Marmon Group, is set for a $1 million rehab of its Madison Street manufacturing plant in Rome, New York. The work will include a new roof, and repairs to walls, floors and columns.

Owl Wire and Cable produces a wide range of sizes and classes of wire and cable. The company employs about 45 people.

The building was previously owned by Rome Cable, which filed for bankruptcy in 2003.

About Owl Wire

Owl Wire and Cable was founded in 1954, and is a manufacturer of un-insulated copper wire and cable for a variety of end uses, including:

  • Electrical and electronic wire and cable for energy-related markets servicing the oil, gas, nuclear, and wind energy markets.
  • Low and medium voltage cables are provided to the appliance, building, mining, and industrial markets.
  • Varied specialty cables utilized in aeronautical, high temperature, and marine markets.
  • Transit, aerospace, defense, communication and other industrial applications. Uses include industrial power and instrumentation; aerial and underground utility distribution; and environments where exposure to harsh elements is anticipated.

The company has three facilities totaling more than 350,000 square feet of manufacturing space.

Corporate Headquarters and manufacturing are located in Canastota, New York, with manufacturing facilities also located in Rome and Boonville, New York.

Berkshire and Marmon

In 2007, Berkshire Hathaway acquired 60% of the 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.

© 2015 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 Duracell Marmon Group Special Report

Special Report: What is Berkshire Getting With Duracell?

(BRK.A), (BRK.B)




On July 29, 2015, leading battery maker Duracell, which has been a unit of Procter & Gamble, will become wholly owned by Berkshire Hathaway.

The deal will bring Berkshire both a top consumer brand and a mountain of tax-free cash.

While Berkshire had announced that Duracell would become part of its Marmon Group of companies, a Marmon spokesman assured me that it will be an independent company that will report directly to Berkshire management.

What Kind of Company is Duracell?

Berkshire is acquiring the market leader in batteries for the home and workplace. In fact, despite P&G having planned to sell-off the unit, Duracell’s market share has grown from 48% in 2012 to 56% in 2014.

The company has highly recognizable brands that consumers in home and work settings are willing to pay more for than private label store brands. According to the company, Duracell’s CopperTop® and Quantum® command the highest average percent of spend among battery brands with 33% and 16%, respectively.

Combined, the two product lines account for close to 50% of the market.

Duracell’s growth has come at the expense of competitors Energizer and Rayovac.

Energizer has seen its market share shrink from 40% in 2012 to 36% in 2014, and Rayovac, which is a much smaller player, has seen its market share drop from 8% in 2012 to just 5% in 2014.

The total alkaline battery market in the U.S. alone is roughly $2.2 billion a year, with Duracell just over $858 million in alkaline batteries sales a year, or roughly 43% of the market.

Of the away-from-home market, healthcare/medical uses $70 million worth of batteries annually, followed closely by manufacturing, which consumes approximately $61 million worth of batteries annually.

A Changing Market

Offices and other workplaces use batteries more than ever. For decades, flashlights where the primary drivers of battery usage in away-from-home settings, but that has changed greatly in just the past few years. According to a report by Kline & Company, wireless devices, including computer mice and keyboards, topped the list in 2014 in the demand for batteries. Wireless mice were the number one use for batteries followed by clocks and remote controls. The traditional flashlight has fallen to number seven, just above smoke alarms.

A Growing Market

At the time of the announcement of Berkshire’s acquisition of Duracell, many analysts downplayed the battery market’s potential for growth. I believe that view is short-sighted, as the away-from-home battery market has not only grown 2% from 2012 to 2014, but Duracell’s share of that market has continued to grow. Batteries are more relevant than ever with the number of wireless devices proliferating.

A Proven Name, A Trusted Brand

Warren Buffett loves quality brands, be they Coca-Cola, Heinz, or Kraft. He knows that consumer brand loyalty is essential for retaining market share in commodity businesses. In Duracell, Berkshire’s getting the most trusted name in batteries.

The 2015 BrandSpark Most Trusted Awards winners for Consumer Packaged Goods brands, which were voted by more than 80,000 American consumers, chose Duracell as the most trusted battery brand.

But Wait, There’s More!

Berkshire’s not only acquiring the market leader for batteries, it’s also receiving a Mount Everest-sized bundle of tax-free cash.

Berkshire’s $4.7 billion stake in Procter & Gamble came from an original investment in Gillette of only $600 million. In cashing out its position, Berkshire not only gets control of Duracell, but Duracell has been recapitalized by P&G with $1.7 billion in cash. This allows Berkshire a transfer of cash that is three times its original investment in Gillette, and the entire $4.7 billion transaction incurs no capital gains taxes.

For Berkshire, Duracell shines brightly indeed.

© 2015 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
BNSF UTLX

New DOT Standards Push Up Tank Car Prices

(BRK.A), (BRK.B)




With a backlog of tank car orders at a record 52,000 units through March 31, 2015, prices for tanks that meet the new DOT 117/TC-117 standards could rise over 23-percent.

Tank car prices are expected to increase from $130,000 to $160,000.

Benefiting from the demand will be Berkshire Hathaway’s UTLX, which is a subsidiary of Berkshire’s Marmon Group, as well as other tank car makers, including Trinity Industries Inc. and Greenbrier Co.

UTLX builds tank cars at its Sheldon manufacturing plant in Houston, Texas, and at its UTLX manufacturing plant in Alexandria, Louisiana.

Communities Demand Safety

In July of 2014, in Lynchburg, Virginia, a derailment of 16 oil tanker cars caught America’s attention, as the fiery tank cars spilled into the James River. In the wake of this and several other high profile accidents, communities along oil train routes all over the country are demanding safer oil trains.

The good news is progress is being made, and according to BNSF internal data through December 31, 2014, as crude oil and ethanol shipments have increased, the number of derailments have decreased by 78% from 2011-2014.

As a common carrier, BNSF can’t refuse to carry petroleum, and the new tank cars will reduce the risk of carrying highly flammable cargo.

Petroleum, Ethanol and LPG make up roughly 7-percent of BNSF’s freight hauling. In 2014 BNSF moved enough petroleum to fill the gas tanks of 350 million vehicles.

Replacing the Entire Fleet

Under Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria. The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.

William A. Furman, Chairman and CEO, Greenbrier Co. said in a statement in May, “Railroads are the safest way to haul large volumes of freight long distances in America, but when it comes to oil, ethanol and other hazardous liquids, more robust tank cars are needed to ensure the safety of our communities. The health, property and general well-being of our citizens shouldn’t be at risk in the event of an accident and the design for the newly designated DOT-117/TC-117 tank car will help substantially mitigate risk.”

The prescribed car has a 9/16 inch tank shell, 11 gauge jacket, 1/2 inch full-height head shield, thermal protection, and improved pressure relief valves and bottom outlet valves.

A Big Market

While older DOT-111 tank cars, which first debuted in 1964, can be temporarily refurbished to bring them up to the new standards, they must be replaced by 2018. This puts the total market for the new DOT 117/TC-117 tank cars at around 160,000 units.

UTLX will certainly be busy the next few years.

© 2015 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
BNSF Charlie Munger Dairy Queen Marmon Group Nebraska Furniture Mart

5 Things You Probably Didn’t Hear at the Berkshire Hathaway Annual Meeting, Even if You Were There

(BRK.A), (BRK.B)

Here are five things gleaned from the Berkshire Hathaway Annual meeting in Omaha, Nebraska, that you might not have learned, even if you were there.

1. That new DOT tank car standards will lower tank car capacity from 31,800 gallons to 30,300 gallons, but BNSF can maintain capacity by adding three extra cars per train.

2. That Berkshire’s HomeServices Lending is now originating $250 million in mortgages a month.

3. That Nebraska Furniture Mart currently has no plans to follow-up its new mega-store in The Colony, Texas; with new stores in other markets.

4. That Dairy Queen’s overseas growth is bypassing Western Europe to focus on Eastern Europe and other emerging markets.

5. That even with new federal tank car standards coming, Union Tank Car is not making the manufacture of new oil tank cars its biggest priority, because they recognize that new pipelines will get built.

And One Thing You Probably Did Hear

“If other people weren’t so often wrong, we wouldn’t be so rich!”—Charlie Munger.

© 2015 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
Fruit of the Loom Marmon Group

Fruit of the Loom Finds Synergy with Sister Company Wells Lamont Industrial

(BRK.A), (BRK.B)

The term synergy, the positive results that come when businesses work together, is often promised in the creation of conglomerates, but is rarely achieved. Most often it is promised by investment bankers trying to get companies to merge, only to later prove to be a mirage when the actuality of the needs of separate operating units prove incompatible.

Even Small Synergies Make a Difference

Fortunately, for Berkshire Hathaway’s Fruit of the Loom and Wells Lamont Industrial companies the synergies are real and bring benefits to both units.

Wells Lamont Industrial, which operates as a part of Berkshire Hathaway’s Marmon Group, has struck a deal with Berkshire’s Fruit of the Loom to equip the employees in its production facilities with Wells Lamont gloves starting in 2015.

Wells Lamont Industrial manufactures a comprehensive selection of hand protection including cut resistant, heat resistant, general purpose, liquid/chemical resistant, leather gloves, and other types of gloves.

“As a Berkshire Hathaway company we look to support our sister companies and were thus introduced to Wells Lamont Industrial,” says Wendy Emmitt, Senior Manager of Safety for Fruit of the Loom. “We were so pleased to discover their hand and arm solutions were not only more cost effective, but were of the highest quality in the industry.

Whether cutting fabric, welding balancing beams, stitching footballs or handling logistics, we have thousands of employees that require gloves to keep their hands protected,” says Emmitt. “Having the guidance and support to ensure we use the right product for each job is critical and Wells Lamont Industrial has proven to be the right partner in making those decisions.”

Fruit of the Loom was acquired by Berkshire Hathaway in 2002, and the Marmon Group was acquired by Berkshire Hathaway in 2008.

© 2015 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 Berkshire Hathaway Automotive Berkshire Hathaway Energy Berkshire Hathaway Specialty Insurance BH Media Lubrizol Marmon Group

2014 Berkshire Hathaway Acquisitions You Didn’t Hear About

(BRK.A), (BRK.B)

2014 was a busy year for Berkshire Hathaway, with over $5 billion in acquisitions both directly by Berkshire Hathaway and through its companies. I’m sure you heard about the purchase of Procter & Gamble’s Duracell battery division, but did you know that other acquisitions made Berkshire the leader in beverage dispensing, and got Berkshire into automobile retailing for the first time? Here is a list of some of the other lesser-known acquisitions. Did you miss any of them?

Marmon Retail & End User Technologies Acquires Cornelius, Inc.
Date: January 2014
What it is: Cornelius, Inc. is the world’s leading supplier of beverage dispensing and cooling equipment. They manufacture and market a broad line of beverage dispense solutions for soft drink, beer, ice, juice, tea, and frozen as well as a complete line of accessories.

Berkshire Hathaway Specialty Insurance Acquires MyAssist, Inc. from Noel Group
Date: January 2014
What it is: MyAssist is a technology-driven, cloud-based personal assistance solution that leverages advanced technologies to give customers a customized, personal experience. MyAssist provides Mercedes-Benz and Ford with live-agent personal-assistance and telematics service using “location-aware technology” from Verizon Communications Inc.

MiTek Acquires Ellis & Watts Global Industries
Date: April 2014
What it is: Ellis & Watts is the recognized leader in the engineering, design, and fabrication of highly customized HVAC and other products sold into the nuclear, military, and other industrial end markets.

EXSIF Worldwide, Inc. Buy’s OCS
Date: April 2014
What it is: OCS Limited is a tank rental and chemical supply company based in Aberdeen, United Kingdom. OCS operates in the offshore oil and gas sector, serving clients in the North Sea.

Berkshire Hathaway Acquires Van Tuyl Group
Date: April 2014
What it is: Van Tuyl Group is the nation’s largest privately-owned auto dealership group, which ranks fifth among all U.S. auto dealership groups.

Berkshire Hathaway Energy Acquires AltaLink
Date: May 2014
What it is: AltaLink owns 12,000 kilometers of transmission lines and 280 substations that bring electricity to 3 million customers in Alberta, Canada.

Berkadia Acquires Keystone Commercial Capital
Date: May 2014
What it is: Keystone Capital is a full-service commercial mortgage banking company headquartered in Phoenix that services more than $2 billion in commercial real estate loans.

BH Media Acquires Catamaran Group
Date: September 2014
What it is: Catamaran Group 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.

Lubrizol Acquires Warwick Chemicals
Date: November 2014
What it is: Warwick Chemicals is a leading global developer, producer and supplier of stain removal technology with hygiene benefits. Headquartered in Mostyn, North Wales, Warwick Chemicals has strong positions with global and regional detergent producers. Their products are an essential element in laundry detergent powders and automatic dishwashing products used across five continents and in more than 50 countries.

Lubrizol Acquires Engineered Chemistry and Integrity Industries
Date: December 2014
What it is: 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.

Berkshire Hathaway Acquires Charter Brokerage
Date: December 2014
What it is: Charter Brokerage is a leading global trade services company providing complete customs, import, export, drawback and related services.

There you have it!

Bolt-On Acquisitions Continue to Power Berkshire’s Growth

© 2015 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.