Next Berkshire acquisition speculation

[rb]

This makes no sense to me. Why would they move to delver these assets given BRK's monster credit?

[Cigarbutt]

This makes no sense to me. Why would they move to delver these assets given BRK's monster credit?

i don't see it that way. Let's say BRK buys a (re)insurance entity. They could boost reserves even if they have capital to support the business going forward. It may have to do with financial conservatism a building a goodwill account with regulators.

If you look at BH Energy (see below, page 21 and especially page 14). They are building while deleveraging and retaining capital. This may come handy if a consolidation (like railways, airlines (oups)) of the midstream energy sector is triggered somehow by a higher cost of capital. Building "partnerships" with regulators and credit rating agencies makes a lot of sense from a long term perspective.

https://www.brkenergy.com/assets/pdf/2019-eei-presentation.pdf

[rb]

The problem with that is that while insurance regulators like reserves, utility regulators like leverage. If a wave of consolidation comes in the utility industry there's always that 140 billion bank account at the mothership.

[gfp]

A very large, simple, family owned private business is coming for sale...  Here's hoping Berkshire at least gets a phone call on it before private equity firms leverage it up.

https://www.wsj.com/articles/medline-industries-has-hired-goldman-sachs-to-explore-a-sale-sources-say-11618089846?mod=hp_lead_pos2

https://en.wikipedia.org/wiki/Medline_Industries

[John Hjorth]

Thank you for sharing, gfp,

It certainly appears to be an interesting acquisition candidate for Berkshire. I really can't imagine a company with this kind of activity ever loosing its relevance for societies going forward long term.

It'll be interesting to see what the founding family does here. Is it about maximizing the economic outcome of a sale [where the buyer[s] suck[s] every drop of blood out of it, with the intent afterwards to flip it], or will it be about finding a new good & permanent home for the company, with a new & supportive owner, also willing to support new ventures with capital, if needed.

[StevieV]

I'd love to see BRK add a large holding like this, but my first reaction is that it seems very unlikely.  Medline has hired GS.  I assume they are chumming the waters by mentioning the PE firms.  Also mention a price target of $30B.  I don't know anything about Medline's financials other than the Wikipedia article says they did $11B in sales in 2018.  Only one number, but I'd guess $30B is a rich price.

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

BRK seems to basically stick to their word about not getting into auctions.  I guess the best hope for an acquisition of these guys would entail Medline establishing some type of price range based on the GS work, and then Medline using that estimate to take a price to BRK.  Obviously, they'd only to that instead of an auction if they felt pretty strongly about being owned by BRK.

I could be wrong, but I don't see it.  I don't think this company announces the GS news and then ultimately goes to BRK.

 

-----------

OT: For a company the size of Medline, the Wikipedia page devoted an unusually large amount of space to a $15,000 labor claim.  About half of the entry for the $30B company was related to the $15,000 payout.

[aws]

2 hours ago, StevieV said:

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

 

Possibly the Scott Fetzer deal.  Here's a bit of a write-up about that which gave us a nice Charlie one-liner:

 

 

He told a story about how First Boston (now Credit Suisse) tried to gin up interest in the mid-1980s for Scott Fetzer, a hodgepodge of small businesses based in Cleveland. It called on 30 firms to help make a sale, but failed to find a buyer.

Mr. Buffett then called Scott Fetzer’s chief executive himself and negotiated the deal face to face. Just as they were about to sign the deal, a banker for First Boston said that the bank was still entitled to a $2 million fee. The banker asked Mr. Buffett’s partner, Charlie Munger, whether he’d like to read the firm’s analysis of Scott Fetzer. Mr. Munger replied, “I’ll pay $2 million not to read it.”

[Spekulatius]

12 hours ago, StevieV said:

I'd love to see BRK add a large holding like this, but my first reaction is that it seems very unlikely.  Medline has hired GS.  I assume they are chumming the waters by mentioning the PE firms.  Also mention a price target of $30B.  I don't know anything about Medline's financials other than the Wikipedia article says they did $11B in sales in 2018.  Only one number, but I'd guess $30B is a rich price.

Has anyone hired GS or similar to explore a sale and then ended up with BRK?  I don't know.  I wouldn't think so, but am open to correction.

BRK seems to basically stick to their word about not getting into auctions.  I guess the best hope for an acquisition of these guys would entail Medline establishing some type of price range based on the GS work, and then Medline using that estimate to take a price to BRK.  Obviously, they'd only to that instead of an auction if they felt pretty strongly about being owned by BRK.

I could be wrong, but I don't see it.  I don't think this company announces the GS news and then ultimately goes to BRK.

 

-----------

OT: For a company the size of Medline, the Wikipedia page devoted an unusually large amount of space to a $15,000 labor claim.  About half of the entry for the $30B company was related to the $15,000 payout.

Marmon was shopped around by Byron Trott from GS (back then) before it end up with Berkshire. Byron Trott is called WEB favorite banker.

https://en.wikipedia.org/wiki/Byron_Trott

[DooDiligence]

2 hours ago, Spekulatius said:

Marmon was shopped around by Byron Trott from GS (back then) before it end up with Berkshire. Byron Trott is called WEB favorite banker.

https://en.wikipedia.org/wiki/Byron_Trott

I wish BRK would've gotten this one. Relatively small, but lots of room to grow.

www.bloomberg.com/news/articles/2019-06-15/bdt-capital-buys-majority-stake-in-texas-staple-whataburger

I think it would be cool if BRK bought BDT.

https://heavy.com/news/2019/06/bdt-capital-partners/

Edited April 12, 2021 by DooDiligence

[StevieV]

Thanks Spek and aws.  Seems like there  is at least some precedent. 

[DooDiligence]

Tangentially interesting,

• Warren Buffett’s conglomerate has no GC, relies on confidantes
• ‘House counsel’ Munger Tolles was paid $105 million since 2005

https://news.bloomberglaw.com/business-and-practice/berkshire-lawyering-buffetts-way-remains-the-munger-tolles-show

Edited April 12, 2021 by DooDiligence

[Mephistopheles]

15 hours ago, aws said:

Possibly the Scott Fetzer deal.  Here's a bit of a write-up about that which gave us a nice Charlie one-liner:

 

 

He told a story about how First Boston (now Credit Suisse) tried to gin up interest in the mid-1980s for Scott Fetzer, a hodgepodge of small businesses based in Cleveland. It called on 30 firms to help make a sale, but failed to find a buyer.

Mr. Buffett then called Scott Fetzer’s chief executive himself and negotiated the deal face to face. Just as they were about to sign the deal, a banker for First Boston said that the bank was still entitled to a $2 million fee. The banker asked Mr. Buffett’s partner, Charlie Munger, whether he’d like to read the firm’s analysis of Scott Fetzer. Mr. Munger replied, “I’ll pay $2 million not to read it.”

lol! where is this from?

[aws]

2 hours ago, Mephistopheles said:

lol! where is this from?

I've seen it a few times but I think it might have first been from the 1999 Berkshire letter