Berkshire News Briefs - 7/28/16

Buffett Buys $1.8 Billion ‘Gem’ of a Medical Insurer in N.Y. (Bloomberg)

Berkshire Hathaway Inc. agreed to buy Medical Liability Mutual Insurance Co., extending Chairman Warren Buffett’s leadership in the business of protecting doctors against lawsuits.

The target company is the largest underwriter of medical professional liability insurance in New York and will convert from a policyholder-owned to a stock business, Omaha, Nebraska-based Berkshire’s National Indemnity unit said Monday in a statement that didn’t disclose terms. Policyholder surplus, a measure of assets minus liabilities, was $1.8 billion as of Dec. 31, according to the statement. The deal is expected to be completed in the third quarter of 2017, pending regulatory and customer approvals. [...]

Berkshire Hathaway Wants to Insure Your Doctor (Fool)

There are two broad types of insurance companies: stock insurers and mutual insurers. Stock insurers are institutions owned by investors seeking to earn a return on their investment. Mutual insurers are owned by their policyholders. Mutual insurers are to insurance what credit unions are to banking.

MLMIC is a mutual insurer. But Buffett's acquisition isn't just altruistic; Berkshire Hathaway is obviously buying MLMIC to make money. Thus, for the deal to go through, MLMIC will have to convert to a stock insurance company. Its policyholders will then receive a payout that MLMIC currently estimates to be roughly equal to premiums paid to the company during the 3-year period from July 2013 to July 2016. [...]

Buffett Says Earnings Guidance Can Lead to Corporate Malpractice (Bloomberg)

Warren Buffett, who is among business executives pushing for improved corporate governance, said that the practice of telling Wall Street what to expect from quarterly earnings can distort management’s priorities.

“Guidance can lead to a lot of malpractice,” the billionaire chairman of Berkshire Hathaway Inc. said Thursday on CNBC. “It doesn’t have to, but I think if the CEO goes out and says, ‘We’re going to earn $1.06 next quarter,’ I think that if they’re going to come in at $1.04, there’s a lot of attempts to find a couple extra pennies some places.” [...]

Lawsuit over Acme Brick retirement plans to move forward (Ft. Worth Star-Telegram)

A lawsuit challenging reduced retirement benefits at Acme Brick can move forward after a federal appeals court ruled that parent Berkshire Hathaway acted improperly.

The suit, filed in 2014 by Acme’s former chief financial officer Judy Hunter, who oversaw the plans, alleged that Berkshire, the Nebraska-based conglomerate run by billionaire Warren Buffett, used “strong-arm tactics” to force the Fort Worth-based brick company to reduce retirement plan benefits. [...]

There's Nothing 'Surprising' About Geico's New Campaign (Advertising Age)

Geico has tapped a big name for a spot in its newest campaign—Marco Polo, the Middle Ages explorer famous for traveling Asia. In a humorous ad that stays true to the insurer's quirky humor, an actor appears as Mr. Polo in an outdoor swimming pool as children play the popular Marco Polo discovery game. Mr. Polo continues to say "Si, scusi," as he believes the kids are looking for him. A voice-over says, "Playing Marco Polo with Marco Polo? Surprising. What's not surprising? How much money Amanda and Keith saved by switching to Geico," as the camera shows real-life Geico customers holding a sign asserting $645 in savings. Meanwhile, a llama noses around the pool. [...]

Berkshire Hathaway Takes on Texas' Three-Tier System (Wine Business)

In another potentially historic case, McLane Company Inc., which has sold food products in Texas sine since the 1980s through the AmeriServ and McLane Foodserice trademarks, has called into question Texas’ “One Share Rule,” by filing a complaint with the Texas Alcohol Control Board (TACB) in Austin. Its parent company, Berkshire Hathaway Inc., owns a two-percent share in Walmart and doesn’t believe that this is a justifiable reason for McLane not to be able to distribute alcoholic beverage in Texas. [...]

How Warren Buffett & Elon Musk Both Compete and Contrast on Energy (Fortune)

Musk and Buffett see the energy and transportation sectors changing in similar ways, and, over the past few years, their companies have increasingly competed with each other over both solar energy and electric cars. [...]

That two of the world’s savviest business minds seem to disagree over how key parts of how the clean energy sector will develop are reflects how the world’s energy transformation is still in its early days. Their opposing viewpoints about fossil fuels also highlight Musk’s entrepreneurial vision-driven spirit with Buffett’s down-to-earth profit-driven investment strategy. [...]

Warren Buffett's Latest Utility Challenge in Nevada (Fool)

When Nevada regulators agreed earlier this year to allow MGM Resorts, Wynn Resorts, and Las Vegas Sands to leave NV Energy, one of Berkshire Hathaway's largest utility assets, it opened a slew of problems for the utility. Not only could the utility lose 7% of its demand if all three casino companies left, but data company Switch has now also challenged why it wasn't allowed to leave the utility a year ago. [...]

Berkshire's Duracell to close South Carolina plant, affecting 430 workers (Reuters)

Duracell said it plans to close a battery-making plant in South Carolina that employs 430 people, making the announcement fewer than five months after being acquired by Warren Buffett's Berkshire Hathaway Inc.

The shutdown of the Lancaster, South Carolina, plant, which made AA batteries, will begin in March and should be completed by the middle of 2019, Duracell said in a statement dated Wednesday.

Duracell is consolidating its North American production of AA and AAA batteries into a plant in LaGrange, Georgia. [...]

Purchases by auction are not really Buffett's style (Omaha World-Herald)

Pardon us if it seems like Berkshire Hathaway Inc. may not be bidding to acquire Oncor Electric Delivery Co., the Texas electricity distribution company that is coming out of bankruptcy.

Sources are telling Texas newspapers that Berkshire Hathaway Energy is a bidder in a high-profile auction for the company after an earlier $18 billion purchase fell through. [...]

But Berkshire CEO Warren Buffett has been so adamantly opposed to auction-style purchases that it could be the Berkshire rumors are being floated to keep other buyers interested and bidding as much as possible. [...]

Berkshire News Briefs - 7/1/16

Warren Buffett Tries To Buy A Smart Basketball (Vocativ)

Spalding, exclusive provider of basketballs for the NBA, is owned by Russell Brands (and not Fruit-of-the-Loom as this article says; I double-checked). Other companies have until July 18th to bid on the bankrupt company's assets before the bankruptcy court finalizes the sale.

Russell Brands LLC, a subsidiary of Buffett’s Berkshire Hathaway Co., has offered $1.5 million for the bankrupt start-up company that makes the 94Fifty Smart Sensor Basketball, according to the Wall Street Journal. The parent company, InfoMotion Sports Technologies Inc., reportedly filed for Chapter 11 protection on March 1.

The 94Fifty ball, which sells for $199.99 and was named a top-25 invention of 2014 by Time magazine, uses embedded sensors in a basketball to log such data as shooting arc, backspin, release speed, and dribble speed. [...]

Berkshire units ordered to halt California workers' comp policy sales (Reuters)

California's insurance commissioner has ordered two Berkshire Hathaway Inc insurance units to stop selling some workers' compensation policies that he considers illegal.

Commissioner Dave Jones on Wednesday issued a "cease and desist order" preventing Berkshire's Applied Underwriters Inc and California Insurance Co units from selling or renewing the policies in question in California.

Jones had on June 20 found that the units evaded a state law meant to protect small businesses from unexpected workers' compensation costs, through the sale of a nontraditional policy whose terms and rates had not been reviewed by state officials. [...]

Claiming Unfair Treatment, Buffett’s McLane Sues To Enter Texas (Shanken News Daily)

McLane Co., the mammoth food and drinks distributor owned by Warren Buffett’s Berkshire Hathaway, has filed a federal lawsuit in Austin claiming that the Texas Alcoholic Beverage Commission (TABC) is unfairly barring it from distributing beverage alcohol in the Lone Star State.

McLane’s lawsuit, filed in conjunction with the Texas Association of Business, takes aim at the TABC’s so-called “one share” rule—under which the agency aims to protect the three-tier system by prohibiting alcohol producers, distributors and retailers from holding as little as one overlapping ownership share in another tier of the business. Because McLane parent Berkshire Hathaway owns a 2% stake in Walmart—which retails beverage alcohol in Texas—the TABC has refused to grant it a distribution license in the state. [...]

Why Warren Buffett is one of the very few making money off Alberta’s mostly unprofitable electric system (Financial Post)

Two years ago, Buffett’s Berkshire Hathaway Inc. bought more than half of all the electric transmission lines crisscrossing Albertan farmland in a $3.2 ­billion acquisition of Calgary-­based AltaLink LP from troubled SNC-­Lavalin Group Inc., making Berkshire Hathaway the electricity transmission provider to 85 per cent of Albertans.

Electricity analysts in the province say that purchase, like many of Buffett’s deals, now looks brilliant. Electricity prices in the province have collapsed — from $49 per megawatt hour in 2014 to around $16 so far this year — but transmission prices have risen, and will continue to rise for at least the next five years. [...]

Two BNSF Freight Trains Collide in Texas on Busy Rail Route (Bloomberg)

Two BNSF Railway Co. freight trains collided in Texas, leaving at least one worker injured. Rescue efforts were under way for three other employees involved in the accident. [...]

The collision occurred at 8:25 a.m. local time near Panhandle, Texas, BNSF said in a statement Tuesday. [...] The trains were carrying intermodal cargo, which are usually consumer goods. The accident occurred on the main line known as the Southern Transcon linking Los Angeles with Chicago. [...]

Berkshire News Briefs - 3/31/16

Buffett's Wells Fargo Stake Hits Level Requiring Fed Review (Bloomberg)

Warren Buffett’s holding in Wells Fargo & Co. reached 10 percent, a level that triggers a Federal Reserve review and could prevent him from buying more shares until he receives regulatory approval.

The billionaire investor’s stake reached that threshold because Wells Fargo has been buying back stock, according to a regulatory filing Monday. The document said the holding is about 506 million shares, the same as on Dec. 31 when it accounted for 9.9 percent. [...]

BNSF furloughs have hit 4,600 employees nationwide (Fort Worth Star-Telegram)

In another sign of the fallout of low energy prices, BNSF Railway says it has furloughed about about 4,600 of its employees nationwide over the past several months.

The furloughs amount to about 10 percent of the Fort Worth-based company’s workforce, matching the layoffs made by the railroad in 2007 and 2008, according to statements made by Matthew Rose, executive chairman of BNSF at an energy conference in Billings, Montana. [...]

Berkshire Hathaway Is 35% Undervalued (Fool)

If I sum up $107 per B-share in investments and $82 per B-share for the operating businesses, that gives me a grand total of $189 per B-share. That's 35% more than the current trading price of $140 per B-share.

Increasing Costs And Premiums At Berkshire Hathaway’s Geico (Valuewalk)

All told, both the severity and frequency of claims have been on the rise at Geico, said David Kass, a business professor at the University of Maryland and a Berkshire Hathaway shareholder.

“This resulted from lower prices for gasoline and an improving economy, which led to more miles being driven by policyholders,” Kass said. “These increases in costs to auto insurers reduces their profitability in the short run until appropriate premium increases can be implemented.” [...]

McLane Co. executive advises students on success in business (Richmond Dispatch)

“If you can accept being inconvenienced, then the rewards will be there, because it is noticed,” said W. Grady Rosier, president and chief executive officer of Temple, Texas-based distributor McLane Co., which he noted supplies groceries and other products to retailers and restaurants in every ZIP code in the nation. [...]

McLane grew from a one-man retail shop opened by Robert McLane in 1894 in Cameron, Texas, to become a $48 billion-a-year supply-chain behemoth, mostly by hitching its own trucking business to the rise of convenience stores such as 7-Eleven starting in the 1950s, then the explosion of big-box chain stores such as Walmart starting in the 1970s.

Rosier, 67, grew up in Florida and was the first in his family to attend college. He joined McLane in 1984 and became CEO in 1995, five years after it had been acquired by Walmart.

In 2000, the company was acquired by Berkshire Hathaway Inc., the holding company managed by billionaire investor Warren Buffett. [...]

International Dairy Queen, Inc. Opens First DQ Grill & Chill® Restaurant in Jordan (BusinessWire)

The Dairy Queen® system, part of Berkshire Hathaway, has opened a new DQ Grill & Chill® restaurant at Abdoun Circle in Amman, Jordan. The opening of this location in Jordan represents the latest country outside of the United States with a DQ brand presence.

SKM Franchise Co. Ltd. has entered into a long-term franchise agreement with American Dairy Queen, Corp. (ADQ) and plans to develop a minimum of 10 locations, including five DQ Grill & Chill® restaurants throughout Jordan over the next five years. [...]

Berkshire News Briefs - 7/29/14

Canada Approves Berkshire Buy of SNC-Lavalin’s AltaLink (Bloomberg)

Berkshire Hathaway Inc.’s energy unit won Canadian approval for its planned purchase of SNC-Lavalin Group Inc.’s AltaLink electric transmission business after committing to reinvesting in the country. The subsidiary of Warren Buffett’s Berkshire has agreed to maintain AltaLink’s staffing and keep the company’s headquarters and senior management in Alberta, Industry Minister James Moore said in a statement yesterday. Berkshire Hathaway Energy also promised to reinvest all of AltaLink’s earnings back into the company or elsewhere in Canada for at least five years.

The transaction is expected to be formally completed in late 2014 or early 2015. Altalink Press Release; Berkshire Hathaway Energy Press Release.

Buffett faces end of $255m a year dividend cheque (New Zealand Herald)

Dow Chemical shares rallied past $53.72 on Wednesday for the first time in nine years. If they close above that price for 20 trading days in a 30-day window, the chemical maker can convert Buffett's $3 billion preferred stake into common stock. Swapping the shares would cut dividend payments that Dow has been paying since it turned to Buffett's Berkshire Hathaway to help finance a takeover in 2009 of Rohm & Haas. [...] The preferred stake is particularly expensive for the chemical maker with interest rates now near record lows. The securities have an 8.5 per cent yield, entitling Berkshire to $255 million in dividends annually.

US railways: Back on track (Financial Times - Free Registration Required)

Since 2011, all seven big Class I railroads in the US and Canada have been earning returns higher than their cost of capital – a modest achievement in most industries but a mark the US’s railroads had missed for the past 70 years. Rising traffic levels are letting railroads sweat their assets harder and work more efficiently. Matt Rose, executive chairman of BNSF, operator of the US’s second-biggest rail network, says the industry is in a “virtuous cycle”. “You make investments,” he says. “You make more money on that; you make more investments. That’s this virtuous cycle that nobody in the 1970s or 1980s thought was possible.”

This Man Will Not Destroy Warren Buffett's Empire Berkshire Hathaway Inc. (Fool Video)

Replacing Warren Buffett atop Berkshire Hathaway will be no easy task once the 83-year old billionaire is out of the picture. While debate rages on over who should replace the Oracle of Omaha as CEO, Buffett has made it clear that he'd like to see his son, Howard, step as a non-executive chairman of the board. Will this mark the beginning of the end of Berkshire Hathaway's greatness?

Geico's gecko ain't cheap: Top 10 insurance advertisers (Insurance Business)

Geico spent more money on advertising than any other insurance company in the U.S, expending a whopping $935.1 million in 2013 alone, according to Nomura. The second biggest advertiser was Allstate Corp., who had a budget of $654.8 million - about $280 million less than Geico. [...] “Berkshire Hathaway’s auto-insurance company Geico has been a growth machine in recent years and the advertising data show just how important good advertising is to growth,” said Nomura. Geico enjoyed 11.2% growth in personal lines in 2013, which is slightly over the 2% growth rate it experienced the previous year.

Major Brands To Acquire Fellow Missouri Wholesaler MoBev (Shanken News Daily)

Missouri-based spirits and wine wholesaler Major Brands has agreed to acquire local rival Missouri Beverage Co. (MoBev) for an undisclosed sum. The deal is expected to close this fall. MoBev, with 2013 sales of around $20 million, is minority-owned by Wirtz Beverage and McLane Co., the latter of which is owned by Warren Buffett’s Berkshire Hathaway firm.

BNSF train carrying North Dakota oil derails in Seattle (Yahoo/Reuters)

A Burlington Northern Santa Fe train carrying crude oil derailed as it left a railyard in north Seattle on Thursday, but there were no reports of a spill or injuries, BNSF said in a statement. Four railcars came off the tracks at around 2 a.m. PDT, three of which were carrying crude oil, said BNSF, which is owned by Berkshire Hathaway. The train originated in North Dakota and was bound for Tesoro Corp's 120,000 barrel-per-day Anacortes oil refinery, 80 miles north of the city, Tesoro confirmed. The derailment comes at a pivotal moment for the booming crude-by-rail industry, which has come under intense scrutiny after a series of accidents over the past 18 months.

Berkshire Unit Needn't Arbitrate Asbestos Coverage Rows (Law360)

A New York federal judge has refused to force a Berkshire Hathaway Inc. subsidiary to arbitrate disputes under Transatlantic Reinsurance Co.'s reinsurance agreements covering American International Group Inc. insurers' asbestos liabilities. U.S. District Judge Edgardo Ramos on Tuesday sided with Berkshire's National Indemnity Co. and denied TransRe's arbitration petition [...] The more than 40 treaties at issue provided reinsurance coverage to AIG for policies dated from 1978 through 1985. While NICO did not sign any of the treaties, it purportedly replaced AIG as a party through loss portfolio transfers, according to TransRe's petition. [...] According to NICO, its agreements with the AIG insurers were for typical services provided by third-party administrators that help insurers collect reinsurance.

Berkshire Subsidiary News - 5/1/13

Buffett's Berkshire Buys Rest of Iscar for $2.05B (Fox Business News)

Warren Buffett's Berkshire Hathaway Inc. agreed to pay $2.05 billion to purchase the remaining piece of an Israeli metalworking company that it had acquired a stake in seven years ago. Berkshire is buying the remaining 20% stake in IMC International Metalworking Companies, called Iscar, from the Wertheimer family, the founders of the firm. They had sold the first 80% to Berkshire for $4 billion in 2006, meaning the company doubled in value since the initial transaction.

Heinz shareholders approve acquisition by 3G, Berkshire (Washington Post)

Heinz is one step closer to going private. The Pittsburgh-based ketchup maker said Tuesday that shareholders overwhelmingly approved its acquisition by Warren Buffett’s Berkshire Hathaway and 3G Capital, the investment firm that also owns Burger King.

Heinz Wins Ruling Tossing Investor Suits Over Berkshire Buyout (Bloomberg Businessweek)

HJ Heinz Co. won a judge’s ruling throwing out lawsuits brought by investors seeking to block the $23 billion buyout of the company by Warren Buffett’s Berkshire Hathaway Inc. and Jorge Paulo Lemann’s 3G Capital. The decision by Pennsylvania state court judge Christine Ward clears the way for a shareholder vote today on the purchase. Nine shareholder lawsuits had been filed before Ward challenging the proposed merger. Three complaints filed in federal court were voluntarily dismissed earlier this month.

New Heinz owners to focus on cutting $14B in debt (Tribune Live)

The $28 billion acquisition of H.J. Heinz Co. is expected to lead to further international growth of the iconic Pittsburgh food company in the long term. But in the short term, a near tripling of the condiment-maker's debt by the buyers, Warren Buffett's Berkshire Hathaway and Brazilian investment firm 3G Capital, could result in aggressive cost-cutting, analysts said.

AP Twitter hack is lesson on risk of social media, Berkshire’s Tamraz says (Washington Post)

The hacking attack that caused the Associated Press to send an erroneous Twitter post shows the risk of social media, said Cathy Baron Tamraz, chief executive officer of Berkshire Hathaway Inc.’s Business Wire. The false information about explosions at the White House, which sent markets down 1 percent in a matter of seconds, is an “object lesson” in why social media aren’t a substitute for press releases, Tamraz said today in a phone interview.

Buffett Trucking Unit Joins Wirtz in Missouri Wine Wager (Bloomberg)

Berkshire Hathaway Inc.’s McLane trucking unit, a supplier to retailers and restaurants, formed a venture with closely held Wirtz Corp. to take a stake in a wine, spirit and beer distributor. The deal to invest in Missouri Beverage Co. is expected to be completed next month, according to a statement yesterday from the companies that didn’t disclose terms. The agreement brings together McLane’s logistics expertise and Wirtz’s experience in the U.S. Midwest, Wirtz President W. Rockwell “Rocky” Wirtz said. [...]

The deal fulfills part of a projection by Berkshire Chairman Warren Buffett last year that the trucking unit would build its business. McLane Chief Executive Officer Grady Rosier bought two alcoholic-beverage wholesale distributors in 2010 and last year acquired Meadowbrook Meat Co., a North Carolina-based business that supplies national restaurant chains.

Israeli Billionaire Opens Industrial Park in Nazareth (Bloomberg)

Wertheimer is now only "Honorary Chairman Emeritus" of Iscar; his son is now the Chairman.

Israeli billionaire Stef Wertheimer, founder of the Warren Buffett-owned Iscar Metalworking Cos., opened an industrial park in Nazareth today that intends to provide manufacturing jobs for local Arab residents. The park’s aim “is to use the skills of the people of Nazareth and surrounding area,” to create export-oriented products, Wertheimer said. Unemployment and poverty rates for Israeli Arabs, who comprise about 20 percent of the country’s population, are higher than for the Jewish majority. [...]

Wertheimer, whose machine-cutting tools company Iscar was bought by Buffett’s Berkshire-Hathaway Inc. for $4 billion in 2006, operates five other industrial parks in Israel’s outlying Galilee and Negev regions that have attracted export-focused manufacturers. He also established an industrial park that opened in Gebze, Turkey in 2003.

Being Green: A GEICO associate on what it's like to be the Gecko (Geico Now)

Jim Parshall is a GEICO senior systems security analyst. He's also a Gecko. "I am an overgrown kid at heart (my cell phone case has Winnie the Pooh on it)," says Parshall, who has made over 100 appearances in costume as GEICO's green spokes-reptile. GEICO Now asked Jim Parshall how someone gets to be the Gecko, and how it really feels to be green.