Categories
Acquisitions MiTek

MiTek Acquires Sales Simplicity

(BRK.A), (BRK.B)

Berkshire Hathaway’s MiTek Industries, Inc. has acquired Sales Simplicity Software, a leader in CRM, sales automation, dynamic content management, and reporting for the home building and real-estate sectors. The company is headquartered in Chandler, Arizona, and no terms were disclosed.

“The acquisition of Sales Simplicity Software is yet another step that MiTek is taking to enrich its offering of operations workflow solutions for residential production builders,” stated Tom Manenti, Chairman and CEO of MiTek. “With this acquisition of Sales Simplicity Software, along with our 2015 acquisition of BuilderMT, and previous acquisitions of Simpad and Kova, we offer a truly unique and expansive selection of software for production builders. Sales Simplicity Software has an excellent user-base among production builders and integration into BuilderMT, which MiTek will further strengthen. MiTek will continue to offer solutions and resources to our customers that are second to none.”

As part of this acquisition, Tom Gebes, the current president of BuilderMT, will also become president of Sales Simplicity and work to tighten the integration between the two companies, as they move toward working together as one system. Customers will still be able to purchase BuilderMT or Sales Simplicity as stand-alone solutions. Sales Simplicity will remain in Chandler, Arizona, with no changes to employee base, and Barry Forbes, the founder of Sales Simplicity, will retire in early 2016.

About Sales Simplicity

Sales Simplicity is the creator and marketer of leading sales automation, content management, lead management, eMarketing and reporting management tools for new single-family, semi-custom and custom homes; condo, multi-family, realtor and senior living providers. Sales Simplicity’s highly intuitive CRM system offers features similar to SalesForce.com, but Sales Simplicity’s CRM is tightly integrated into Sales Simplicity’s award-winning, Cloud-based, sales-automation platform, and the entire system has been specifically envisioned for home builders. Since Sales Simplicity is already linked deeply into Facebook, Twitter, and other social media systems, users of Sales Simplicity’s new CRM features will immediately benefit from single-platform, dash-board-driven campaign management tools linked directly to web analysis, eMarketing, lead management, follow-ups, and new prospects.

About MiTek

MiTek is a diversified global supplier of software, engineered products, services, and equipment to the residential, commercial, and industrial, construction sectors.

Bolt-On Acquisitions Continue to Power Berkshire’s Growth

© 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.

Categories
Lubrizol

Lubrizol Targets Wearable Tech with New TPU Line

(BRK.A), (BRK.B)

Lubrizol, a maker of specialty chemicals for a wide variety of applications, is launching a new series of thermoplastic polyurethane (TPU) products, Estane SMART TPU, for smart wearable devices.

The Estane SMART TPU product portfolio is specifically designed to address the rapidly growing wearable device market, particularly for soft touch bands in smartwatches and fitness tracker applications.

The Estane SMART TPU series includes both aromatic and aliphatic TPU grades with hardness levels ranging from 70A to 88A. Depending on OEM requirements, the product portfolio offers the wearable market a solution for soft materials having robust mechanical properties and a good chemical and UV resistance.

Junkers Wang, global market segment manager, Estane Engineered Polymers Industrial Consumer Electronics, says: “The new product series will further strengthen our intimacy with electronics OEMs along with other ongoing elastomer based projects that are already in production. Estane SMART TPU is off to an amazing start as some of the products have been adopted by premium OEMs for wristband applications.”

According to the company, its Estane TPU portfolio bridges the gap between flexible rubber and rigid plastics.

© 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.

Categories
Kraft Heinz

Kraft Heinz to Bring Davenport Facility into the 21st Century

Continuing to be the king of bologna is important not only for Oscar Meyer, it’s important for Iowa.

The Kraft Heinz Company’s planned $203 million Davenport, Iowa, facility will bring its Davenport facility into the 21st century. That’s a big leap from its antiquated downtown facility that was originally constructed in the late 19th century and is known as the “World’s Biggest Bologna Factory.”

The new facility will be built in the Eastern Iowa Industrial Center, and will receive a property tax exemption from the City of Davenport.

The project, which will be finished by 2017, will also receive financial assistance from the Iowa Economic Development Authority in the amount of a $1.75 million in tax credits and a $3 million forgivable loan.

On its end, Kraft Heinz has committed to preserving at least 475 full-time positions of the current 1,200 that exist at the old facility. Even with the workforce expected to be reduced by half, the construction of the new plant in Iowa is seen as a victory, as the state of Iowa defeated a competing offer from another unnamed state.

In a situation similar to the one in Davenport, the Oscar Mayer headquarters, which is also in a nearly century-old plant in Madison, Wisconsin, will not stay open, and its 1,000 jobs will be eliminated by 2017.

Under 3G Capital’s management of the recently combined companies, Kraft Heinz has committed to wringing out $1.5 billion in annual savings, and the company announced in November 2015 that it will close seven factories in the U.S. and Canada.

Warren Buffett Supports 3G’s Strategy

“3G has been buying businesses that have too many people,” Buffett explained at the 2015 Berkshire Hathaway annual meeting. “You will have never found a statement from Charlie or me saying that a business should have more people than needed.”

© 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.

Categories
Acquisitions BH Media

BH Media Group Adds Fredericksburg Newspaper to Virginia Print Media Outlets

(BRK.A), (BRK.B)

Berkshire Hathaway’s BH Media Group has acquired The Free Lance-Star, a newspaper serving Fredericksburg, Virginia. The paper was purchased from the investment firm Sandton Capital Partners, which picked up the paper through bankruptcy in June 2014.

BH Media Group acquired The Free Lance-Star daily newspaper, its website fredericksburg.com, the Star Weekly, and a commercial printing facility.

Published for more than 140 years, The Free Lance-Star has a Monday through Friday daily circulation of 36,991, Saturday circulation of 40,685, and Sunday circulation of 43,070. In addition, the Star Weekly newspaper has a total circulation of 79,400.

The acquisition gives BH Media Group a total of 37 newspapers, publications and websites serving Virginia.

In total, BH Media Group owns 73 newspapers and other titles located in 10 states, including: Alabama, Florida, Iowa, Nebraska, New Jersey, North Carolina, Oklahoma, South Carolina, Texas and Virginia. They also own and operate WPLG-TV, an ABC affiliate in Miami, Florida.

© 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.

Categories
Kraft Heinz

$229 million Kraft Heinz Expansion Saves the Bacon in Missouri

(BRK.A), (BRK.B)

The city of Kirksville, Missouri, and the Kraft Heinz Company are nearing the completion of a $229 million financing agreement that will see the company adding as many as 69 jobs and will preserve the existing 463 full-time jobs.

Kraft Heinz had originally planned to lay-off 279 workers and close its bacon producing facility.

Under the terms of the agreement, the city of Kirksville will issue Chapter 100 bonds that allows cities or counties to purchase or construct certain types of projects with bond proceeds and to lease or sell the project to a company. These “industrial development” bonds may be issued either as a “revenue” bond or a general obligation bond.

Eligible projects include purchase, construction, extension and improvement of warehouses, distribution facilities, and industrial plants.

Property Tax Abatement

Under Missouri law, upon the approval of the city/county issuer, it may be possible to exempt/abate most of the real and/or personal property tax of new real estate improvements and new machinery financed by a Chapter 100 bond. To enact this procedure, the city/county must own the assets financed by the bonds and an eligible company would lease the assets from the city/county for the term of the bonds. The amount and term of abatement/exemption depends on a negotiation with the city/county issuer, as they have the discretion to abate any portion of the property taxes.

The property tax is exempt by virtue of public ownership, however, the city/county may require that a portion of the payments otherwise due will be paid in the form of a payment in lieu of tax.

In this case, the city of Kirksville will own the property, eliminating property taxes for Kraft Heinz over a 10-year period.

Kraft Heinz will pay PILOTs (payments in lieu of taxes) to the local taxing districts. The amount will be 50-percent of the revenues that will be generated from the expansion project.

The tax abatement period will begin in 2017 and end in 2026.

© 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
Berkshire Hathaway Energy

Tax Credit Extension for Wind and Solar Boosts Berkshire’s Renewable Energy Investments

(BRK.A), (BRK.B)

Both the United States House and Senate agreed to grant extensions to the 30 percent investment tax credit (ITC) for the production of solar energy and the 2.3-cent-per-kilowatt-hour production tax credit (PTC) for the production of wind power.

The extensions will fuel the growth of both wind and solar, as the industries gain tax credits through 2020.

The credits were originally scheduled to expire for any projects beginning construction after December 31, 2014.The credits have now been extended to construction starting before January 1, 2020, with gradual phase-outs.

A Big Boost for Berkshire

With its huge commitment to wind power in Iowa, Nebraska and Texas, Berkshire Hathaway is reportedly the largest user of these energy investment tax credits.

In October, Berkshire Hathaway Energy borrowed $275 Million for its Jumbo Road wind farm in Texas, and Berkshire Hathaway’s MidAmerican Energy Company is currently building the tallest land-based wind turbine ever built in the United States at its wind farm in Adams County, Iowa.

Meeting Lower Carbon Goals

In August 2015, President Obama and the EPA announced the Clean Power Plan, which set aggressive goals for reducing carbon pollution from power plants. When the Clean Power Plan is fully in place in 2030, carbon pollution from the power sector will be 32 percent below 2005 levels.

Expanded use of wind and solar power generation will enable the retirement of antiquated coal-burning and oil-burning plants, which will not only reduce carbon dioxide (CO2) emissions linked to climate change, but will also reduce emissions of sulfur dioxide and other pollutants that cause an assortment of health ailments.

© 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 Berkshire Hathaway Automotive

Special Report: Did CarMax Just Make a Berkshire Hathaway Automotive Acquisition More Likely?

(BRK.A), (BRK.B)

CarMax, the no haggle, used car retailer with 150+ locations nationwide,
has greatly increased its presence in Boston. The move creates competitive pressures for all of Boston’s car dealers and brings up a big question.

Is it now likely that the Herb Chambers group of auto dealerships will become part of Berkshire Hathaway Automotive (BHA)?

Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, looks to be the perfect fit for BHA, and its owner could be ready to sell. Herb Chambers could be all the more ready now that CarMax has expanded from a single outlet in the town of North Attleboro, Massachusetts, to adding two new outlets in the towns of Norwood and Danvers.

The Norwood store features 40,000 square-feet of showroom and service area, and the Danvers store features 20,000 square-feet of showroom and service area.

And There’s More Coming to Boston

A CarMax a little further west in the town of Westborough is scheduled to open in the summer of 2016, so the competition will only continue ratcheting up in the greater Boston area.

CarMax is not just another dealership group. It has muscle. It’s  a national used car power house that’s grown to be a member of the FORTUNE 500 and the S&P 500.

According to the company, during the 12 months ending February 28, 2014, nationally CarMax retailed 526,929 used cars and sold 342,576 wholesale vehicles at in-store auctions.

Who is Herb Chambers?

Herb Chambers is a former copier salesman who has spent the past thirty years building a top dealership group that is the 12th largest privately-held auto group in the nation.

Would he sell?

Chambers has already stated that he would sell if the price is right, and he tips his hat to Warren Buffett’s $4.1 billion Van Tuyl Group acquisition for boosting his personal net worth to some $1.5 billion, as valuations jumped throughout the whole sector.

Auto sales are currently at record levels and private equity money, including financier George Soros, has been looking to get in.

Opening the Door to Berkshire

Over the years, Chambers has turned down offers from AutoNation Inc. and Penske Automotive Group. Now, with valuations high for auto groups, there may be no better time to cash out.

Like Buffett, Chambers is a Shrewd Guy

Herb Chambers is certainly not afraid to sell when the time is right. Three decades ago he founded A-Copy America, and after merging it with Ikon Office Solutions, he cashed out with a big sale to Ricoh. It was a shrewd move, and Chambers has proved to be a shrewd guy who currently sells more cars than anyone else in New England.

Now, with competition heating up in the Boston market, the perfect exit strategy for Herb Chambers this time could involve Berkshire. After all, Warren Buffett’s already let be known that his goal is to make BHA much bigger.

Buffett wrote in his 2015 Berkshire Hathaway Chairman’s Letter that “…if we can buy dealerships at sensible prices – we will build a business that before long will be multiples the size of Van Tuyl’s $9 billion of sales.”

A deal with Herb Chambers could be just the way to do it.

© 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
Lubrizol

Lubrizol Debuts Products for Stationary Natural Gas Market

(BRK.A), (BRK.B)

The Lubrizol Corporation, a specialty chemical manufacturer owned by Berkshire Hathaway, has released two products for the growing stationary natural gas market. The products are new advanced 4-stroke low ash technologies: Lubrizol® SG9L01 and Lubrizol® SG9L20.

The World’s Fastest Growing Energy Resource

Lubrizol notes that the Stationary natural gas is one of the world’s fastest growing primary energy resources, accounting for 24% of the global primary energy consumption and anticipated to increase 50% by 2040 according to the U.S. Energy Information Administration.

Among the many market applications for stationary natural gas are: power generation, cogeneration, gas compression, biogas, landfill and more, and these areas have developed increasingly complex requirements for desired operation.

Lubrizol’s stationary natural gas lubricants work to optimize engine performance and provide:

• Extended service life for maximized uptime
• Robust protection against the most severe gasses
• Enhanced reduction in harmful deposits
• Assured emissions compliance

“Over the past decade, Lubrizol has dedicated significant resources and capital to the development of these highly advanced additive packages,” says Al Haas, Lubrizol global product manager, Stationary Natural Gas Engines.

According to the company, Lubrizol SG9L01 delivers enhanced varnish and deposit protection at extreme temperatures, reduced combustion chamber deposits, improved copper corrosion protection and excellent wear protection with Lubrizol Hyper® ZDP Technology. Lubrizol SG9L20 offers these benefits and beyond, delivering breakthrough extended oil life for maximized uptime, improved maintenance interval planning and increased overhaul intervals.

“Lubrizol’s advanced technology resources brought these products to life,” says Paul Nai, Lubrizol global business manager, Large and Small Engines “We’ve put novel chemistry to work in order to deliver higher performance beyond what has been seen before in stationary natural gas additive technology.”

Lubrizol’s investment in stationary natural gas and its development of new additive packages reflect the company’s commitment to this important and growing market.

© 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 Berkshire Hathaway Automotive Berkshire Hathaway Energy Duracell Minority Stock Positions NetJets Precision Castparts Warren Buffett

Commentary: A Christmas Wish List for Under Warren Buffett’s Tree

(BRK.A), (BRK.B)

Here’s a Christmas wish list for presents under Warren Buffett’s tree. The items are big, so we’ll fit them under Charlie Munger’s tree as well.

1. Precision Castparts: There’s nothing like getting the present you bought for yourself. The pending acquisition the aerospace manufacturer looks like the gift that will keep on giving.  Demand for new airplanes will double over the next 15 years, as aging fleets are retired and millions more people start to fly regularly in India and China.

2. Duracell: Because everyone likes to get cash for Christmas! With the Duracell acquisition set to close in February 2016, Berkshire will gain not only the leading alkaline battery manufacturer, but will also get a company recapitalized by P&G with $1.7 billion in cash, and will get huge tax savings as it trades in its appreciated P&G stock for the battery maker.

3. More German Companies: Warren Buffett’s admiration for the German economy was on full display at the Berkshire Hathaway annual meeting in May 2015. This past February, Berkshire Hathaway struck a deal to acquire Devlet Louis Motorradvertriebs, a mail-order and retail chain selling motorbike clothing and accessories. The move, according to Buffett, was just the first small acquisition in a country with a strong economy and work ethic. And, with a rising dollar and a shaky euro, will more German companies fit under Berkshire’s tree?

4. Lots of Natural Gas: As the world dumps coal and moves to cheaper and cleaner forms of energy, Berkshire’s on the verge of striking it rich in Australia’s gas fields. Natural gas prices may be cratering now, but it never hurts to have a majority share of four trillion cubic feet of gas-in-place (yes, trillion) in Australia’s Whicher Range and Wonnerup gas fields. A new test well hopefully will bring good news in the new year.

5. More Auto Dealers: When Berkshire Hathaway jumped into the auto retailing business in March 2015, with its acquisition of the Van Tuyl Group, it added a whole new line of business to the mega-conglomerate. The Van Tuyl Group was the largest privately owned auto dealership group in the U.S., and Buffett promised that this was just the start of building a major auto-retailing empire. So, will Herb Chambers Companies, a privately-held, Boston-based dealership group with 55 total dealerships, be the perfect fit for Berkshire Hathaway Automotive? Its owner looks ready to sell. Time to wrap this one up and put a bow on it.

6. Happy Pilots at NetJets: Forget your crazy uncle, there’s nothing like having a happy family at Christmas. This holiday, NetJets’ pilots and its flight attendants will be celebrating their new contracts that bring substantial raises. Hopefully, they’ll use it to buy some of Berkshire’s fine products. How about some jewelry from Borsheims? It’s been a good year. Go for it!

7. More Solar & Wind! Berkshire’s quickly becoming the leading energy producer and distributor of solar and wind energy. This year saw major wind farm projects, including a new wind farm site in Adams County, Iowa, which will produce 162 megawatts of additional wind generation capacity in Iowa. Berkshire’s aggressive expansion of it solar power farms saw its Topaz Solar Farm in San Luis Obispo County, California, become one of the largest photovoltaic solar farms in the world. And, there’s plenty of room under the tree for more such projects, which not only bring cheap energy, but also lower environmental costs as they are emissions free. With the cost of solar energy dropping fast, Berkshire’s been signing amazing deals that are a Christmas present now and for decades to come. In Nevada, it has contracted to buy electricity from First Solar’s soon to be built Playa Solar 2 at the astoundingly low rate of only 3.87 cents a kilowatt-hour, and the deal is a fixed rate contract for twenty years.

8. More Deals with 3G Capital: Because everyone likes surprises. 3G’s aggressive acquisition strategy has been the perfect partner for Berkshire’s cash. 3G brings not only the aggressive cost-cutting (aggressive is an understatement) that is bringing legacy companies such as Kraft-Heinz into the 21st century, but also gives excellent financing and equity opportunities. 3G’s merger of Burger King with Tim Hortons brought Berkshire fat interest payments and made Berkshire a minority owner of the newly formed Restaurant Brands International. Surely, there are more deals to be done.

Hard to fit this all under the Christmas tree? Berkshire’s a big company. There’s room for all this and more.

Merry Christmas everybody!

–David Mazor

© 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
Insurance National indemnity

Berkshire Sets Up New Unit to Sell Insurance Online

(BRK.A), (BRK.B)

Berkshire Hathaway has set up a new insurance company specifically to sell insurance online to medium and large companies. The company, Berkshire Hathaway Direct Insurance Company (BHDIC), will utilize staffing and resources from Berkshire’s other insurance companies.

BHDIC will initially market workers’ compensation and business owners’ package policies.

Back office operations and investment management will be supported by affiliated Berkshire Hathaway companies. BHDIC’s risk management, including overall exposures, risk appetite and control systems, will be fully incorporated into National Indemnity Company’s (NICO) existing risk management program.

BHDIC was established using the shell of the American Centennial Insurance Company, which Berkshire took over in 2008.

Stable Ratings

Ratings agency A.M. Best has given the company an A++ rating and an issuer credit rating (ICR) of “aaa”.

A.M. Best based the ratings on BHDIC’s 90% quota share agreement with NICO, which has been rated “aaa” for the past 10 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.