Berkshire News Briefs - 1/26/17

BNSF budgets $3.4 billion for 2017 capex plan

BNSF Railway Co. unveiled a $3.4 billion capital expenditure plan for 2017, the Class I announced yesterday. Similar to last year's $3.9 billion plan, the largest component of this year's program will be to replace and maintain the railroad's core network and related assets. That aspect of this year's work will amount to about $2.4 billion, BNSF officials said in a press release. [...] In addition, BNSF expects to spend $400 million on expansion projects; $100 million on positive train control implementation; and $400 million on locomotives, freight cars and other equipment acquisitions.[...]

Kansas logistics park offers big intermodal-growth potential for BNSF

BNSF Railway Co. has tried to accelerate ID efforts in recent years to gain as big a business boost as possible, especially of the intermodal variety. From 2011 through 2015, the Class I each year landed more than $1 billion worth of new or expanded facilities along its lines, including $1.2 billion in 2015 and nearly $1.5 billion in 2014. And as of late last month, BNSF was on pace to surpass the $1 billion mark for the sixth-straight year, with about 100 ID projects on the 2016 docket, including several at a fast-growing, footprint-swelling logistics park in Kansas. [...]

J.B. Hunt, BNSF will review revenue split

[...] Last year, about $3.7 billion -- 60 percent of J.B. Hunt's revenue -- came from its intermodal segment. Michael Haverty, who was the president of Santa Fe Railway when he approached J.B. Hunt with the original intermodal deal in 1989, has estimated that BNSF makes about $1 billion annually from the deal. Santa Fe Railway Corp. and Burlington Northern Inc. merged to form BNSF in 1993.

The "evergreen" intermodal contract automatically renews each year. The agreement stipulates that the revenue division will be negotiated by the two companies and is reviewed quarterly. J.B. Hunt is questioning the period beginning May 1, 2016. [...]

Richline Group Acquires The Aaron Group

Richline Group, a wholly-owned subsidiary of Berkshire Hathaway, and The Aaron Group, a leading jewelry manufacturer and marketer, announced today that Richline has acquired The Aaron Group business effective today, January 11th. [...]

Since its founding as Samuel Aaron Jewelry in 1950, the Aaron Group has grown from its New York City roots to become a widely renowned, vertically integrated international jewelry manufacturer. Along the way, the Aaron Group has remained a true family business and, under the stewardship of third-generation leader Robert (Bobby) Kempler, has achieved stature as a major global force, with operations, factories, partnerships and hundreds of employees in New York, London, Mumbai, Hong Kong, and Guangzhou. [...]

Buffett’s Berkshire Buys German Pipe Company Wilhelm Schulz

A unit of Warren Buffett’s Berkshire Hathaway Inc. agreed to buy Wilhelm Schulz GmbH, a closely held German maker of piping components, as the billionaire accelerates an expansion in Europe.

Rainer Floeth, chief executive officer of Krefeld, Germany-based Wilhelm Schulz, confirmed by phone that Berkshire’s Precision Castparts had agreed to buy the company. He declined to elaborate on terms due to contractual obligations. The deal was first reported by German newspaper Handelsblatt, which cited Precision Castparts Corp. CEO Mark Donegan. [...]

AIG to pay Buffett's Berkshire about $10 billion in insurance deal

American International Group Inc (AIG.N) has agreed to pay roughly $10.2 billion to Warren Buffett's Berkshire Hathaway Inc (BRKa.N) to take on many long-term risks on U.S. commercial insurance policies it has already written.

The reinsurance transaction covers "long-tail" exposures, which are liabilities that emerge long after policies are issued, from excess casualty, workers compensation and other AIG policies issued before last year.

Berkshire's National Indemnity Co unit, led by Buffett's reinsurance chief Ajit Jain, will take on 80 percent of net losses in excess of the first $25 billion, with a maximum liability of $20 billion. [...]

The 5 Operating Principles Behind Berkshire Hathaway’s Uniquely Profitable Reinsurance Business

In his 2015 letter, Warren Buffett warned Berkshire Hathaway shareholders that prospects for the reinsurance industry had dimmed. However, as this week's $1.5 billion deal with The Hartford illustrates, five operating principles will enable Berkshire's reinsurance activity to beat competitors and remain comfortably profitable. [...]

1. Maintain unmatched financial strength and reputation
2. Focus on large, unusual risks
3. Price risks rationally and act quickly
4. Keep risks on your books
5. Stay disciplined and carry on

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Berkshire News Briefs - 12/14/14

Berkshire Hathaway buys Charter Brokerage (Fortune)

Warren Buffett’s Berkshire Hathaway Inc on Friday said it was buying oil industry logistics provider Charter Brokerage from private equity firm Arsenal Capital Partners. [...] Charter is a U.S. petroleum and chemical drawback services provider. A drawback is the refund of import duties and taxes on a product when a form of that same product is exported. Charter Brokerage connects importers and exporters in the petroleum and petrochemical industries to arrange such refunds. Earlier this year, a source familiar with Arsenal’s potential sale of Charter valued the company at up to $500 million.

Warren Buffett Looks Ahead to Berkshire’s Next 50 Years (WSJ MoneyBeat)

Warren Buffett says that lately he’s been pondering the future of Berkshire Hathaway Inc. more than usual. Like in years past, he has been busy composing his annual letter to shareholders reviewing Berkshire’s performance in 2014. However, because 2015 will mark the golden anniversary of Berkshire Hathaway under “current management,” Mr. Buffett has also been laying out, on paper, his vision for Berkshire for the next 50 years. [...] Berkshire shareholders and those who follow the conglomerate’s activities will get a bonus next year: Mr. Munger is also writing down his vision for Berkshire for the next 50 years. Shareholders love Mr. Munger’s sometimes bruising wit and deadpan delivery, often in response to questions posed at Berkshire’s annual meeting.

Berkshire Hathaway Director Susan Decker Offers Rare Peek Into How The Berkshire Board Functions (Silicon Valley Business Journal)

Berkshire Hathaway's unusual operating style extends deep into the boardroom, according to Susan Decker, the former Yahoo! CFO who became a director in 2007. [...] "The board is not involved in the valuation decision for acquisitions. Warren will often discuss large deals with the board in advance, but usually at the conceptual level, rather than asking for approval of valuation and structuring," Decker said. "It's the opposite with other boards I'm on, in which approval is required by the board for the funds used for large acquisitions and for structuring considerations of the deal."

NetJets infiltrated private website, pilots say (Columbus Dispatch)

The NetJets pilots union is accusing company officials of impersonating a member of the union on Twitter and infiltrating a password-protected message board. [...] The union has a website for its members. Parts are public, but much of the site is private and password-protected. The lawsuit alleges that in September a NetJets official had several printouts of pages of “ confidential communications” from the message board. This created a “chilling effect on the ability of union members to communicate with one another and their union leadership and interferes with the union’s ability to fairly represent (the pilots),” the lawsuit states, adding that such surveillance is a violation of the Railway Labor and Stored Communication acts. [...] The lawsuit also charges that tweets from someone with the Twitter handle TwinkieTheKid tried to interfere with union elections, threatened to blacklist union pilots from other employment and posted photos of union members “conducting lawful picketing, thereby documenting the identities of union members who engaged in protected activities under the Railway Labor Act.”

Pilots picket NetJets at Art Basel (NY Post)

Pilots for private jet firm NetJets are picketing outside Art Basel Thursday against their own company, which is owned by Warren Buffet‘s Berkshire Hathaway, for a plan that would reduce their paycheck by 5 percent over five years, and have them work more hours. [...] Explaining, that the reason CEO Jordan Hansell “is telling us we have to take pay cuts is because Berkshire Hathaway is demanding a greater return, they want more profits to be sent up to Berkshire … our owners are some of the wealthiest people on the planet, really.”

Berkshire Hathaway insurance unit to enter Singapore (Omaha World Herald)

Berkshire Hathaway Specialty Insurance, a 2013 startup at Warren Buffett’s Berkshire Hathaway, has expanded to Singapore, where it plans to sell business coverage. The Boston-based unit of Omaha’s Berkshire said in a statement Monday it had received a license to sell insurance in Singapore, a city-state in Southeast Asia with a population of 5.5 million that is the world’s second-largest port and fourth-largest financial center. BHSI, started at Berkshire Hathaway with the defection last year of many top executives at New York-based American International Group, plans to sell coverage in Singapore for commercial property, business liabilities, energy and construction projects, and marine and financial risks.

Understanding The True Value of Warren Buffett's Berkshire Hathaway Inc. (Fool)

So what is the actual intrinsic value of Berkshire Hathaway and the litany of businesses it owns? Well, that's an easier question to ask than to answer. [...] Buffett is right in saying neither he nor Charlie -- nor anyone else for that matter -- can definitively calculate the true intrinsic value of Berkshire. But we can be certain it is worth a whole lot more than the $8.2 billion (or just 2.2% of its total value) the market currently suggests it is.

Berkshire Hathaway Owns 4.18% of Restaurant Brands International and Controls 14.37% of its Voting Shares (Valuewalk)

Upon the closing of the Burger King acquisition of Tim Horton’s on December 12, 2014, Berkshire purchased, for a total of $3 billion, a 9% perpetual voting preferred stock and exercised a warrant to purchase 8,438,225 common shares at the exercise price of $0.01 per share [...] However, Berkshire’s press release indicates that it now owns 4.18% of the outstanding common shares of QSR. [...] The 4.18% stake translates into approximately 20.2 million shares which, at BKW’s closing price on December 12 of $35.50 per share, are currently valued at about $715 million.

Buffett's wealth balloons as Berkshire hits high (CNBC)

Warren Buffett is now the world's second-richest person as Berkshire Hathaway's stock rallied to an all-time high. Forbes said its real-time ranking of the world's billionaires now estimates Buffett's wealth at $74.4 billion, about $1.5 billion more than Carlos Slim's $72.9 billion. Slim is now in third place.