Buffett’s to spend $60 bn on buyout
Berkshire Hathaway chairman Warren Buffett is ready to spend $40 billion to $60 billion on a buyout.
By Agencies |
Berkshire Hathaway chairman Warren Buffett is ready to spend $40 billion to $60 billion on a buyout, and his opportunities are expanding as stocks fall and leveraged buyouts dry up.
Shares of health insurers, steelmakers and department stores are as much as 18% cheaper than in May, when Buffett said he would “figure out a way” to come up with $60 billion for the right deal. WellPoint, Nucor, Kohl’s and dozens more companies are now closer to meeting his investment criteria.
“A time of turmoil among conventional investors on Wall Street is helpful for Berkshire Hathaway,” said Thomas Russo, who helps manage more than $3 billion, including Berkshire shares, at Gardner Russo & Gardner in Lancaster, Pennsylvania.
Buffett’s “patience has put him in a position where he certainly has the capacity to act.”
Buffett, 76, would have no trouble funding purchases because his Omaha, Nebraska-based company has $46 billion of cash. LBO firms, which have agreed to $700 billion of takeovers this year, face higher borrowing costs and skittish investors who won’t buy the loans and bonds they need to finance an average two-thirds of their deals.
“If he can pull off a big acquisition, it creates a lot of value,” said James Armstrong, president of Pittsburgh-based Henry H Armstrong Associates, who’s biggest holding is Berkshire. The shares, which rose at an annual rate of 21% over the past two decades, are virtually unchanged this year at $110,000.
Berkshire probably will say later today that second-quarter profit from insurance underwriting fell for the first time in a year, according to Charles Gates, a New York-based analyst at Credit Suisse Group.
Shares of health insurers, steelmakers and department stores are as much as 18% cheaper than in May, when Buffett said he would “figure out a way” to come up with $60 billion for the right deal. WellPoint, Nucor, Kohl’s and dozens more companies are now closer to meeting his investment criteria.
“A time of turmoil among conventional investors on Wall Street is helpful for Berkshire Hathaway,” said Thomas Russo, who helps manage more than $3 billion, including Berkshire shares, at Gardner Russo & Gardner in Lancaster, Pennsylvania.
Buffett’s “patience has put him in a position where he certainly has the capacity to act.”
Buffett, 76, would have no trouble funding purchases because his Omaha, Nebraska-based company has $46 billion of cash. LBO firms, which have agreed to $700 billion of takeovers this year, face higher borrowing costs and skittish investors who won’t buy the loans and bonds they need to finance an average two-thirds of their deals.
“If he can pull off a big acquisition, it creates a lot of value,” said James Armstrong, president of Pittsburgh-based Henry H Armstrong Associates, who’s biggest holding is Berkshire. The shares, which rose at an annual rate of 21% over the past two decades, are virtually unchanged this year at $110,000.
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Berkshire probably will say later today that second-quarter profit from insurance underwriting fell for the first time in a year, according to Charles Gates, a New York-based analyst at Credit Suisse Group.
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