Warren Buffett is still hunting for an “elephant” deal – and he’s got $48 billion worth of firepower ready to make a big takeover happen.
That’s the message from the latest regulatory filings from Buffett’s investment giant, Berkshire Hathaway. The company had $US47.8 billion in cash at the end of September, just $US115 million below the record cash level held at the same time last year.
With analysts tipping the cash will not be used for dividends to Berkshire Hathaway investors or share buy backs, the most likely scenario is that Buffett will continue his seemingly never-ending search for a big-ticket investment in a process he likes to call “elephant hunting”.
But as Jeff Matthews, author of Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett and a Berkshire shareholder, told Bloomberg: “There aren’t a lot of elephants around.”
Buffett’s last really big acquisition was the $30 billion deal to buy railway group Burlington National in 2010.
In the meantime, he’s making do with a few smaller purchases.
The latest is a deal to buy 80-year-old party supplies group Oriental Trading for an estimated $500 million (the price has not been disclosed by Berkshire Hathaway).
The company, which was founded in 1932 as novelty goods wholesaler, now sells more than 40,000 party supply, craft and novelty products through its website and famous printed catalogues.
In the last decade the company has passed through the hands of two sets of private equity investors; the latter saddled the company with so much debt that it was forced to seek bankruptcy protection in 2010.
But those problems appear to be behind Oriental now and the company has had operating earnings of $70 million in the last 12 months, according to The Wall Street Journal.
Buffett is not planning major changes, with the current management team to stay in place as is typical of Berkshire takeovers.
“Oriental Trading is a leader in its industry, has a strong management team and delivers exceptional customer value and service,” Buffett said.
“We are delighted to have them join the Berkshire Hathaway family and continue their quest to make the world more fun.”
You’ve just gotta love that folksy style…