Berkshire News Briefs - 7/28/13

HomeServices Lending Announces Plans to Become Wholly-Owned Subsidiary of HomeServices of America (HomeServices Blog)

HomeServices Lending LLC, a joint venture with Wells Fargo, today announced plans to transition to become a wholly-owned subsidiary of HomeServices of America, a Berkshire Hathaway affiliate. The transition work has been underway for some time, and is expected to conclude in 2014.

Berkshire Allowed to Count BNSF Purchase Costs in Rail Rates (Bloomberg Businessweek)

Warren Buffett’s Berkshire Hathaway Inc. (A:US) can count the $8.1 billion premium it paid to acquire Burlington Northern Santa Fe Corp. in the formula used to calculate prices for some shippers, a decision that may make it harder for some rail customers to challenge their rates. The U.S. Surface Transportation Board, which regulates some rail rates, today ruled that Berkshire may count the premium from its 2009 purchase of BNSF by spreading those costs over seven years. Shippers moving products, including coal, asked the regulator to prohibit the company from counting the premium in its cost base, saying Berkshire was unfairly trying to make them reimburse its expenses in the $26.5 billion BNSF acquisition.

Why Warren Buffett's Berkshire Hathaway pulled out of India (Economic Times)

India has long been viewed as a value investor's dream: rapid growth, 1.2 billion people pining for a taste of globalisation, and underdeveloped industries ripe for turnarounds. So it surprised few when the genre's guru, Warren Buffett, placed a bet on the world's ninth-biggest economy. What did come as a surprise was last week's decision by the billionaire's Berkshire Hathaway to give up on India's insurance market after just two years. [...] Buffett isn't alone. Walmart, ArcelorMittal and Posco are pulling back on investments that they had announced with great fanfare. What's scaring foreigners away? A rampant political dysfunction that has stopped India's progress cold.

Buffett Reinsures Irish State Health Claims as Population Ages (Bloomberg Businessweek)

Warren Buffett’s Berkshire Hathaway Inc. will reinsure about 700 million euros ($923 million) in claims for Ireland’s state health insurer, which is seeking to stem losses and its burden on taxpayers as the population ages. Vhi Healthcare and Omaha, Nebraska-based Berkshire signed a deal for one year, which Vhi will seek to extend, Brighid Smyth, a spokeswoman for the Dublin-based insurer, said by phone. She declined to give terms of the agreement, which will cover half of Vhi’s 1.4 billion-euro claim book. The agreement may save Irish taxpayers as much as 90 million euros, Smyth said, as Vhi will require a smaller boost to its reserves given Berkshire’s assumption of some of the insurer’s risks.

Around the Water Cooler With Dairy Queen’s CEO (US News & World Report)

[John] Gainor, 56, started at International Dairy Queen, Inc. as the chief supply chain officer and became the CEO five years ago. He now oversees more than 6,300 restaurants worldwide, with more than 4,500 in the United States. Since Dairy Queen is a wholly owned subsidiary of Warren Buffett's Berkshire Hathaway Inc., the company isn't directly in charge of the several hundred thousand employees. But that doesn't mean Gainor misses an opportunity to converse with the Blizzard techs pumping soft serve behind the counter.

Buffett’s PacifiCorp Agrees to 160-Megawatt Wind Deal With Apex (Bloomberg)

PacifiCorp, a utility unit of Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), agreed to buy power from a wind farm that Apex Clean Energy Inc. plans to build in Utah. PacifiCorp will buy the output from closely held Apex’s $230 million Long Ridge wind farm, which will consist of two 80-megawatt projects and is expected to produce enough electricity for about 43,000 average U.S. homes [...]

Berkshire Hathaway derided for ‘foolish’ Aon deal (Financial Times)

Warren Buffett’s Berkshire Hathaway has been branded “foolish” by a leading insurance executive for blindly following underwriting decisions taken by Lloyd’s of London rivals. An unusual deal that Berkshire has struck with the insurance broker Aon is likely to “end in tears”, warned Richard Brindle, founder and chief executive of FTSE 250-listed specialist insurer Lancashire. Lloyd’s officials have already complained that the arrangement – under which Aon has begun to automatically allocate a chunk of all business it places at the historic market to Berkshire – threatens to undermine underwriting expertise.

Warren Buffett joins ceremony at Carmel Geico service center (Indianapolis Star)

Two American business icons made an appearance Monday at the ribbon-cutting for GEICO’s customer service center in Carmel. One was a big green gecko. The other was billionaire Warren Buffett. GEICO announced March 18 that it would open a service center at 101 W. 103rd St. and bring 1,200 new jobs to the city. [...] Berkshire Hathaway owns agricultural systems manufacturer CTB International Corp. in Milford, liability insurance provider Medical Protective Co. in Fort Wayne and RV manufacturer Forest River Inc. in Elkhart. Buffett also donated money toward the $26 million redevelopment of the historic Meadows neighborhood on the Northeastside in 2011. “Obviously, we like Indiana,” Buffett said to a group of reporters at the ceremony.

Dow Says ‘Rest Assured’ on Effort to Redeem Buffett Stake (Bloomberg)

Dow Chemical Co. said its prospects have improved for redeeming $4 billion in preferred stock held by Warren Buffett’s Berkshire Hathaway Inc.and Kuwait’s sovereign wealth fund after interest rates climbed. [...] Midland, Michigan-based Dow pays an 8.5 percent annual dividend on preferred shares it sold to help fund the 2009 purchase of Rohm & Haas Co. Redeeming those is a “top priority for us,” Weideman said. “As we’ve said all along, timing’s important on this.”

5 Reasons Why the Bears Are Wrong About Berkshire Hathaway (Fool Blog)

On May 13, Michael Price of MFP Investors gave a slide presentation at London Value Conference arguing that the fair value of Berkshire Hathaway's stock should be roughly 20% lower than it is today. So are the bears right about Berkshire? Here's five reasons why I believe the answer is an emphatic “No.”

Real Money Stock Pick: Berkshire Hathaway (Fool Video)

As I [Andrew Tonner] add a few companies this week to the defensive value investing portfolio that I manage for the Fool, the theme of this specific purchase could be "invest with the best." Of course, I'm talking about Berkshire Hathaway, which to me perfectly embodies the conservative, outstanding companies I prefer to own.

Candy date with Warren Buffett up for auction (CBS News)

Now one lucky bidder can spend the day picking the brains of the fourth richest man in the world. The magnate is putting himself on the auction block Thursday to benefit Communities in Schools of Los Angeles (CIS), a charity that focuses on keeping kids in school. [...] The winner of the auction will win an "all-you-can-eat" tour of the See's Candy factory in Los Angeles, where Buffet will demonstrate "the only acceptable way to eat a bonbon." Currently, the highest offer is at $18,000 with two bids since launching.

Berkshire News Briefs - 7/21/13

The Press of Atlantic City to be purchased by Warren Buffett's BH Media Group (Press of Atlantic City)

The Press of Atlantic City will be sold to Warren Buffett’s BH Media Group by ABARTA, a private holding company based in Pittsburgh, Pa., interim Publisher James W. Hopson announced Thursday. [...] The Press of Atlantic City is a 67,000 daily and 77,000 Sunday circulation newspaper that serves Atlantic, Cape May, Cumberland and Ocean counties. The newspaper’s Web site, pressofAtlanticCity.com , reaches 700,000 unique visitors each month. The Bitzer/Taylor family, owners of ABARTA, has owned The Press since 1951.

The Not-So-Dirty Secret Behind Warren Buffett's Recent Buy (Fool)

Back in late May, MidAmerican Energy, a subsidiary of Warren Buffet's Berkshire Hathaway, made a $5.59 billion offer to buy NV Energy. On the surface, this seems like the prototypical Warren Buffett kind of acquisition. If you dig deeper, though, there is one lesser known area that could make this purchase an even bigger win. [...] The biggest upside for the NV Energy lies not in its current customers or its generation capacity, but in the other market that it could serve: California.

Buffett’s Tulsa World Is Latest Berkshire Newspaper to Cut Staff (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc., acquirer of more than 25 daily newspapers in the last two years, is eliminating about 50 jobs at the Tulsa World in Oklahoma after making cuts at other publications. A dozen positions in the administrative, information technology and production departments were cut immediately, according to a report posted today on the newspaper’s website. The World announced other changes including the creation of distribution centers where carriers will pick up newspapers, eliminating transportation costs for the company.

Berkshire Hathaway HomeServices brand announces first 9 affiliates (Inman News)

Berkshire Hathaway HomeServices, the new HomeServices of America franchise brand, has announced the first nine Prudential Real Estate affiliates that will transition to the brand this fall. The nine firms joining Berkshire Hathaway HomeServices this fall represent about 20 percent of the roughly 50,000 agents currently affiliated with the Prudential brand. Under the terms of a 2011 sale of the Prudential Real Estate brand to Brookfield Asset Management, the brand is slated to fade away when the last rights expire to it in the late 2020s.

Berkshire Hathaway to End India Insurance-Distribution Deal (WSJ)

Two years after Berkshire Hathaway Inc. launched an online insurance-distribution business in India, it is stopping sales of the only products it had been dealing with in the country. [...] Berkshire had launched its India insurance venture, Berkshireinsurance.com, in March 2011, with a big splash by timing it with Chairman Warren Buffett's first visit to India. Berkshire didn't underwrite insurance, but sold mostly vehicle- and travel-insurance policies of Bajaj Allianz, via the website.

What's Behind Berkshire Hathaway Inc's Big DaVita Buy? (Minyanville)

Berkshire has been building a position in DaVita since the fourth quarter of 2011. The stage was set for Berkshire's latest big purchase, however, on July 1, when the Centers for Medicare & Medicaid Services (CMS) unexpectedly announced a proposed rule to cut payments to large dialysis companies by as much as 12% starting in 2014. If approved, the move could close the doors of some smaller dialysis facilities. After the announcement, many DaVita shareholders headed for the exit. By July 2, its share price had dropped by 6% from the day earlier, and by about 13% from the yearly high reached in May. That day, Berkshire portfolio manager Ted Weschler, known for finding value in distressed companies, moved to buy another 639,400 shares of DaVita, boosting its stake to 14.8%, for a total transaction value of $73.37 million.

Warren Buffett sees 'betrayal' as hospital drains big endowment (CNBC)

Donald and Mildred Othmer made a lot of money investing with Warren Buffett. When they died, they wanted their Buffett profits to be given back to the community. They probably never imagined what would happen next. In what it calls a "cautionary tale for wealthy investors who hope their gifts will make a long-term impact," The Wall Street Journal reports on the destruction of a $135 million hospital endowment created less than 20 years ago by the Othmers. Buffett tells the Journal that if the donors were alive, "I would think...they would feel betrayed."

Special Section: Berkshire's Exposure to Detroit Bankruptcy

Buffett Insurer Wrap Firms Up Detroit Debt (Bond Buyer)

In the sea of junk-rated Detroit debt trading for 30 to 40 cents on the dollar, a small piece of the city’s defaulted pension certificates continue to see retail bids of nearly 90 cents on the dollar. The higher valued debt features an insurance pledge from Berkshire Hathaway Assurance Corp., the government bond insurer controlled by financier Warren Buffett. [...] Though Buffett has repeatedly expressed caution about insuring tax-exempt bonds, BHAC has about $400 million in exposure to Detroit’s tainted debt, most of which is sewer bonds. All the BHAC insurance is a wrap on top of an original guarantee from Financial Guaranty Insurance Co. BHAC’s secondary insurance gives additional comfort to investors and means BHAC would only have to pay if the issuer defaults and then the original insurer can’t meet the obligation — a scenario not too far off for Detroit creditors.

Detroit's bust could ripple back to Berkshire (Omaha World-Herald)

Detroit has filed for bankruptcy to reduce its debts, and Berkshire Hathaway Inc. of Omaha insures about $700 million worth of Detroit's sewer and water bonds. It's unclear whether the bankruptcy case would let Detroit default on the bonds or pay only part of what it owes, which could prompt the bond holders to file insurance claims against Berkshire. [...] The bonds insured by Berkshire are being repaid from sewer and water fees, not city taxes pledged to Detroit's “general obligation” bonds. Detroit is seeking to pay only a portion of its general obligation bond debt, along with other debts the city owes. Revenue bonds, such as the sewer and water bonds insured by Berkshire, generally are repaid as long as the revenue continues, and sewer and water fees generally are regarded as a steady source of money. That difference might be enough to prevent a claim against Berkshire.

Special bonds have better chance of being paid (Crain's Detroit Business)

While Detroit's bondholders will be hat-in-hand fighting for owed debt, holders of the city's special revenue bonds have a better prospect of payment through the Chapter 9 process. Detroit's special revenue bonds, including the $5.9 billion bond debt of the Detroit Water and Sewerage Department, are protected under Section 922 D of the U.S. Bankruptcy Code. Payments on a special revenue bond are guaranteed solely from revenue generated from an entity -- such as the water department -- rather than from taxes, as is the case with other bonds. [...] But legal arguments will be raised and those payments will be attacked by other bondholders, said Timothy Wittebort, a partner at Howard & Howard Attorneys PLC in Royal Oak. Wittebort said Detroit's pensioners will argue that the Michigan Constitution protects their pensions and go after the revenue-generating assets.

Berkshire News Briefs - 7/15/13

Does Berkshire Have the World's Biggest Market Cap? (Fool)

The Fool's Anders Bylund sorts out the confusing numbers provided by Yahoo and Google finance to figure out what the real market cap of Berkshire Hathaway is.

But what about Berkshire Hathaway, then? Run over to Google Finance and you'll find Berkshire's "A" shares listed at a $284 billion market cap, while "B" shares get a $283 billion price tag. Doesn't that add up to $567 billion, far surpassing both Exxon and Apple? Not so fast, my friend. It's time to double-check our data. Take a trip down to Yahoo! Finance instead, and you'll find Berkshire "A" listed at $284 billion, while "B" shares get a minuscule $189 million market cap. Add all of it up, and "B" shares become a mere rounding error next to their "A"-class cousins. What's going on here?

Heinz Profit Climbed 12 Before Buffett, Lemann Takeover (MoneyNews)

HJ Heinz Co., the world’s largest ketchup maker, said fiscal fourth-quarter profit climbed 12 percent ahead of the company’s takeover by Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital. Net income rose to $195.9 million in the three months ended April 28, Pittsburgh-based Heinz said Tuesday in a regulatory filing. That compares with $175.3 million in the same period last year, when the company recorded costs tied to factory closures and job cuts. Berkshire and 3G completed the Heinz deal in June for $28.8 billion including debt financing.

Top 10 U.S. Aircraft Insurers (Insurance Journal)

In case last week's Asiana Airlines crash in San Francisco got you thinking about who insures airplanes, it turns out that Berkshire Hathaway is one of the top U.S. insurers writing aircraft policies in South Korea and the #5 insurer in the United States for aircraft (with $121.9 million in premiums written), but they were not an insurer for that particular plane crash.

Warren Buffett & Brad Pitt Working Main Street (2 Paragraphs)

Small town mayors all over the country have been busy seeking votes — not for re-election but to win Benjamin Moore’s “Main Street Matters” contest. Benjamin Moore & Co. (owned by Warren Buffett’s Berkshire Hathaway) just announced the winners: 20 North American towns will each receive a free fresh paint job for their respective downtowns. As a major corporate sponsor of actor Brad Pitt’s charitable organization Make It Right, which builds green homes for communities in need, Benjamin Moore was able to get Pitt as the “Main Street Matters” campaign spokesperson.

Wells Fargo's Buffett Business Drives Wall Street Ascendance (The Street)

Wells Fargo is now a solidly growing Wall Street player, after the nation's largest mortgage lender saw its strongest earnings growth from investment banking and wealth management businesses. [...] Wells Fargo's rising investment banking earnings also reflect burgeoning business the bank gets from its largest shareholder; Warren Buffett of Berkshire Hathaway. The bank's Wall Street-based earnings were likely bolstered by fees it earned in advising and financing Berkshire Hathaway and 3G Capital's $28 billion acquisition of ketchup maker Heinz in February. [...] Only Wells Fargo and JPMorgan were hired to advise and finance Berkshire and 3G's deal for Heinz, which stands as one of the largest acquisitions of 2013. In 2009, Wells and JPMorgan played a similarly exclusive role in underwriting financing for Berkshire's acquisition of Burlington Northern Santa Fe.

Shaw Announces Sustainability Progress (PR Newswire)

Shaw Industries Group, Inc., a Berkshire Hathaway company, has released its 2012 corporate sustainability report. Key highlights from the report -- titled "Looking Ahead" -- include: Reclaiming and recycling more than 600 million pounds of post-consumer carpet since 2006; Surpassing 60 percent of Shaw products being Cradle to Cradle Certified; Achieving LEED(R) certification for three additional facilities; Reducing water intensity by 33.7 percent since 2006; Providing 56,196 associate volunteer hours and more than $2 million in contributions to community causes; Breaking ground on a manufacturing facility in Nantong, China to serve the thriving Asia market -- representative of the company's efforts to produce products locally.

Warren Buffett's generosity grows with Berkshire's stock price (CNBC)

With a lot of help from a 39 percent increase in the value of Berkshire Hathaway's Class B stock over the past 12 months, Warren Buffett's donation to the Bill & Melinda Gates Foundation this year was the largest since his annual contributions began in 2006. Buffett's gift of 17,458,431 shares is worth just over $2 billion at today's closing price of $115.01, a bit below the all-time high of $115.98 reached in mid-June.

Berkshire News Briefs - 7/7/13

Buffett’s Geico Promotes Roberts as Insurer Takes on Allstate (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. promoted Bill Roberts to president and chief operating officer of the Geico unit as it competes with Progressive Corp. and Allstate Corp. for auto insurance customers. Roberts had been executive vice president of Geico since 2000 with duties including marketing, advertising and the Internet business unit, the insurer said in a statement today.

Even if Warren Buffett's successor isn't known, Geico's might be (Omaha World-Herald)

Olza M. “Tony” Nicely, once considered a potential successor to Warren Buffett as CEO of Berkshire Hathaway Inc., now has his own successor in line. [...] Nicely remains CEO and chairman, but last week Geico promoted Bill Roberts to president and chief operating officer. [...] Becoming president and COO of a company is usually the last step before the top job, and the two men's ages seem to line up, uh, nicely.

Geico shifts leadership gears, puts pedal to the metal on advertising (Washington Post)

The leadership shuffle comes as the company closes in on Allstate as the nation’s second-largest auto insurer. The industry leader is State Farm. Geico surpassed Allstate in business during the first quarter of the year, posting $4.72 billion in new auto insurance premiums, compared with its competitor’s $4.53 billion. Allstate, though, has picked up more business over four quarters, $17.65 billion in premiums to Geico’s $17.16 billion [...]

On the same day as Geico’s leadership announcement, the company reported that it had sold its 12 millionth car policy. (The firm now covers more than 18 million total vehicles.) Meanwhile, the company’s underwriting profit jumped 18 percent last year and its employee rolls have grown to 28,000 [...]

In 2012, Geico spent more than $1.1 billion on advertising, up 12.45 percent from the year before and an even greater boost than the 10.1 percent increase its posted between 2010 and 2011 [...]

It was by far the most spent by any property insurer last year — Allstate was a distant second, at $828.8 million — and the fifth-largest amount spent on advertising by any company in the United States [...]

How Berkshire Hathaway Is Quietly Taking Over the World (Fool)

On multiple occasions, Warren Buffett has bluntly admitted that Berkshire Hathaway's enormous market capitalization will make it impossible for the company to duplicate its past rates of return going forward. That's no wonder, especially when we note by the end of 2012 he had grown Berkshire's per-share book value by 586,817% over the previous 48 years. But that certainly doesn't mean Berkshire can't continue to beat the market going forward. What it does mean, however, is that investors can expect the role of small acquisitions to continue playing an ever-increasing role in expanding Berkshire's moat, even as the company continues to snap up relatively large businesses.

Berkshire's Specialty Insurance, Bigger Than You Think? (Fool Video)

Two weeks ago, Berkshire Hathaway announced its newly formed commercial property-casualty insurance group, Berkshire Hathaway Specialty Insurance, is officially up and running. While that may not be a surprise given the fact Berkshire hired four of AIG's senior property-casualty executives in April, investors may not realize just how much this unit could eventually contribute to Berkshire's operations as the company takes market share from other players in the space [...]

Berkshire Hathaway Buys More DaVita Stock (The Street)

Warren Buffett's company bought more than 500,000 more shares of dialysis provider DaVita Inc.'s stock last week after prices dropped because of fears of reduced Medicare payments. The latest purchases reported to the Securities and Exchange Commission on Friday give Buffett's Berkshire Hathaway Inc. 15.6 million shares of DaVita's stock. Berkshire now owns about 15 percent of DaVita, but it has agreed not to buy more than 25 percent of the Denver-based company unless, both companies agree. DaVita runs nearly 2,000 outpatient dialysis clinics.

Everything You Need to Know About Keystone XL: Why Railroads Care (Fool)

In terms of oil sand crossing the border via rail, only Canadian Pacific, Canadian National Railway, and Burlington Northern Santa Fe, part of the Berkshire Hathaway holdings, have rail lines that would deliver oil sands to the Gulf [...] This companies are also the only game in town in case producers and refiners find it attractive to move oil sands to refineries on the West [...] If Keystone XL gets rejected, it more than likely creates a better opportunity for rail to compete. Lack of takeaway capacity could potentially hurt prices for Western Canadian Select, which would also help rail companies. If prices can stay within a range where that $30 premium to move via rail is still competitive against other heavy crude sources in the Gulf Coast, then rail certainly has a shot to make an impact.

Undercover Boss: Oriental Trading Company (YouTube)

Oriental Trading Company CEO Sam Taylor was featured on the CBS TV series "Undercover Boss" last year, and the episode is up on YouTube, if you have 42 minutes to kill. The episode aired over 6 months before Oriental Trading Company was acquired by Berkshire Hathaway last November (and was probably filmed many more months before that).