His Berkshire Hathaway vehicle has $120bn cash and is hungry for a deal
Thursday 09 May 2019 Author: Martin Gamble

Arguably the world’s most famous living investor, Warren Buffett has once again signaled that his investment vehicle Berkshire Hathaway could make a sizeable acquisition in the UK.

Having revealed his willingness to strike such a deal in a recent Financial Times interview, Buffett repeated this desire last weekend at Berkshire Hathaway’s annual shareholder meeting.

His company’s cash pile is currently worth $120bn, meaning that Berkshire Hathaway has considerable resources to make a very large acquisition.

He said at the meeting: ‘I am not an Englishman, but I have a feeling it was a mistake to vote to leave, but it doesn’t destroy my appetite in the least for making a very large acquisition in the UK.’

Berkshire Hathaway previously invested in UK supermarket chain Tesco (TSCO) and still owns Northern Powergrid, which distributes electricity in the north east of England.

We believe Buffett would want to buy a large UK business with at least $100m of pre-tax profit.

He has a tendency to favour companies generating lots of free cash flow and a consistent record of earning high rates of return on equity. Those criteria reduce the universe down considerably.

Consumer franchises such as Unilever (ULVR) would fit the criteria, but it has previously rebuffed an offer by Berkshire and its partner 3G Capital.

Screening for Buffett-type stocks also reveals Taylor Wimpey (TW.) and Berkeley (BKG) as possible targets. Berkshire Hathaway understands housebuilders well; it has a dominant 49% share of manufactured homes in the US, through its ownership of Clayton Homes.

It is far more likely that Buffett will strike a deal with a family-controlled business, where the cultural fit with Berkshire Hathaway is strong and the family is looking to exit, confident that the business will receive careful stewardship.

An audience with Buffett and Munger

Often called ‘Woodstock for capitalists’, Berkshire Hathaway’s annual shareholder meeting took place on 4 May, with 44,000 people flocking to Omaha, anticipating words of wisdom from leaders Warren Buffett and Charlie Munger.

Over the decades Berkshire Hathaway’s meeting has grown from a small gathering at a cafeteria of National Indemnity to a weekend-long extravaganza. Buffett and Munger typically answers questions for five hours on stage.

For the last few years the event has been live-streamed over the internet and the webcast also translated into Mandarin. It is estimated that the event is watched by 3.1m people worldwide.

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