Berkshire News Briefs - 8/12/15

Warren Buffett Cuts Berkshire Hathaway's Biggest Ever Deal In $37B Precision Castparts Buy (Forbes)

On Monday morning, Berkshire confirmed it would buy aerospace components giant Precision Castparts (PCP) for $235 a share in cash, valuing it at $37.2 billion, when including the Portland, Oregon based company’s near $5 billion in debt. The deal comes at a 20% premium to Precision Castparts closing share price on Friday, however, it amounts to a slight discount from the company’s stock price at the beginning of 2015.

For Berkshire Hathaway, the deal is a major bet on U.S. aerospace and manufacturing, bringing a top parts supplier to defense and aviation companies around the world into the coffers of Buffett’s conglomerate. With over $10 billion in annual sales, Precision Castparts would instantly become one of Berkshire’s largest operating subsidiaries. The company reported a $1.5 billion profit in 2014, slightly less than the profits Berkshire’s energy unit generated last year. [...]

Berkshire Gets Dealmaker CEO in Precision Castparts Purchase (Bloomberg)

Mark Donegan, chairman and chief executive officer of Precision Castparts Corp., made more than a few deals of his own before becoming a target of billionaire Warren Buffett’s Berkshire Hathaway Inc.

Precision Castparts, a maker of equipment for the aerospace and energy industries, has completed at least 30 acquisitions since Donegan took over as CEO in 2002. [...]

Donegan could be an investment in the future for Buffett: The CEO -- typically loath to talk to the press -- was 58 when Precision Castparts filed its proxy in July. Berkshire likes to buy high-quality management teams that can help direct its vast cash pile, said Joel Levington, a senior credit analyst with Bloomberg Intelligence. [...]

Berkshire Profit Falls, Missing Estimates on Insurance Slump (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc. posted second-quarter profit that missed analysts’ estimates because of higher claims costs at insurance units including Geico.

Net income dropped 37 percent to $4.01 billion, or $2,442 a share, from $6.4 billion, or $3,889, a year earlier, the Omaha, Nebraska-based company said Friday in a statement. Operating earnings, which exclude some investment results, were $2,367 a share, compared with the average $3,038 estimate of three analysts surveyed by Bloomberg.

Why Earnings Fell at Berkshire Hathaway, but Book Value Rises in 2015 (24/7 Wall Street)

Berkshire Hathaway pointed out that, since the beginning of the year, Berkshire’s shareholder equity has increased $5.9 billion and its book value per Class A equivalent share was up by 2.4% to $149,735 per share. The company’s insurance float at June 30, 2015 was $85.1 billion. For a comparison to the first quarter book value, Berkshire Hathaway’s book value per Class A equivalent share had increased by 0.5% since the end of 2014 to $146,963 as of March 31, 2015. [...]

Operating earnings came to $3.89 billion in the second quarter, down from $4.33 billion a year ago. Gains from investments fell to $236 million, from $1.96 billion a year ago. [...]

If you add up the investment income and the operating income from the conglomerate structure, Berkshire Hathaway made $4.01 billion in net earnings, down from $6.395 billion a year earlier. [...]

Warren Buffett's Berkshire Hathaway loses millions on Australian storms (Australian Financial Review)

US billionaire Warren Buffett's Berkshire Hathaway company pointed to reinsurance losses in Australia as it explained a 37 per cent drop in second-quarter profit.

The company's American reinsurance business lost $US115 million ($155 million) directly because of storm damage on the Australian east coast in April, the company disclosed in a regulatory filing in the US. [...]

Symetra’s Deal Enriches Berkshire Hathaway (WSJ MoneyBeat)

Two insurers most people have never heard of just agreed to a deal, and Warren Buffett’s company is another $144 million richer.

U.S. life insurance company Symetra Financial Corp. said Tuesday it agreed to sell itself to Sumitomo Life Insurance Co. for about $3.8 billion in the latest large acquisition in the U.S. by a Japanese life insurer.

Among Symetra’s biggest shareholders: Mr. Buffett’s Berkshire Hathaway Inc. [...]

But Berkshire’s Symetra’s ownership, while hardly a secret, isn’t as widely known as most of its other equity positions. The stock doesn’t show up in in Berkshire’s most widely watched quarterly disclosures. Instead, it’s listed in the holdings for a Berkshire reinsurance unit, General Reinsurance Corp.

U.S. Identifies Insider Trading Ring With Ukraine Hackers (Bloomberg)

Exposing a new front in cybercrime, U.S. authorities broke up an alleged insider trading ring that relied on computer hackers to pilfer corporate press announcements and then profited by trading on the sensitive information before it became public. [...]

The suspected hackers, who are thought to be in Ukraine, allegedly infiltrated the computer servers of PRNewswire Association LLC, Marketwired and Business Wire, a unit of Warren Buffett’s Berkshire Hathaway Inc., over a five-year period.

They siphoned more than 150,000 press releases including corporate data on earnings that could be used to anticipate stock market moves and make profitable trades, the U.S. said. [...]

Can the Insurance Industry Survive Driverless Cars? (Bloomberg)

Auto insurance has long been a lucrative business. The industry collected about $195 billion in premiums last year from U.S. drivers. New customers are the source of so much profit that Geico alone spends more than $1 billion a year on ads to pitch its policies with a talking lizard and other characters. Yet even Warren Buffett, whose company, Berkshire Hathaway, owns Geico, is talking about the long-term risks to the business model. "If you could come up with anything involved in driving that cut accidents by 30 percent, 40 percent, 50 percent, that would be wonderful," he said at a conference in March. "But we would not be holding a party at our insurance company."

International Dairy Queen Opens First Location in Kuwait (Business Wire)

The Dairy Queen® system, part of Berkshire Hathaway, has opened a new DQ Grill & Chill® restaurant at the Marina Mall in Salmiya, Kuwait. The opening of this location makes Kuwait the 27th country outside the U.S. and Canada with a DQ® presence. [...]

Durra Khaled for Foodstuffs Co., a subsidiary of KMGC, has signed a long-term franchise agreement with the Dairy Queen system and plans to develop more than 20 DQ Grill & Chill restaurants and DQ Treat stores throughout Kuwait over the next five years.

Berkshire News Briefs - 7/28/15

Berkshire Hathaway joins major renewable-energy effort (Omaha World-Herald)

Berkshire Hathaway Energy on Monday joined a dozen major U.S. businesses at the White House in calling for robust action on global warming. [...]

BH Energy has invested more than $15 billion in renewable energy and is targeting another $15 billion in investments, Greg Abel, chairman, president and chief executive officer, said in a press release.

“Joining these other U.S. businesses is one more way we can demonstrate our commitment to lead on climate action,” said Abel, who is seen as a possible successor to Buffett, who turns 85 next month.

MidAmerican aiming for 57 percent of energy from wind (Des Moines Register)

Bill Fehrman, CEO of MidAmerican Energy, said Monday the company could get up to 57 percent of its energy from wind with its latest renewable energy project.

And while wind's growing presence in MidAmerican's portfolio is encouraging, so is news that the Des Moines-based utility is looking to invest in solar projects in Iowa, with community solar gardens and utility-sized solar leading the possible options. [...]

He talked with the Register as the utility's parent, Berkshire Hathaway Energy, joined a dozen other national companies in launching the American Business Act on Climate Pledge at the White House.

More on the American Business Act on Climate Pledge (including BH Energy's specific pledges).

Inside PacifiCorp's IRP: How efficiency will power the Buffett utility's next decade (UtilityDive)

PacifiCorp, part of Warren Buffett's Berkshire Hathaway Inc., serves 1.8 million customers in six states through its Pacific Power and Rocky Mountain Power utilities, and is planning to meet 86% of new demand across the next decade through demand side management. [...]

That means the utility won't need to construct another major power plant until 2028, and along the way will either shutter 10 older, inefficient coal units, or convert them to natural gas.

Berkshire Hathaway’s Bright Future (Barron's)

The Heinz score rivals anything ever achieved in the private-equity industry. It also demonstrates that Buffett, who is celebrating his 50th year at the helm of Berkshire this year, is still going strong ahead of his 85th birthday in August. Berkshire is his baby, and the company is better than ever despite the lackluster performance of its big equity portfolio [...]

“I’m scratching my head about Berkshire,” says Jay Gelb, a Barclays analyst. “The earnings power is stronger than ever, the company has done a series of attractive acquisitions, and it just closed on Kraft. None of that is reflected in Berkshire’s valuation.” [...]

British Open playoff win-win for Buffett’s Netjets (Irish Times)

The three-man British Open playoff was a win-win-win for NetJets. Zach Johnson, Louis Oosthuizen and Marc Leishman, the three men in Monday’s four-hole playoff, each have sponsorship agreements with the luxury aviation unit at Warren Buffett’s Berkshire Hathaway.

All three wore shirts with the company’s logo throughout the 18-hole final round at St. Andrews in Scotland, then the playoff, which Johnson won. Monday’s final round telecast on ESPN generated about $6.5 million in media exposure for NetJets [...]

EU clears Berkshire Hathaway's purchase of Duracell (Reuters)

The European Commission said on Thursday it had approved Berkshire Hathaway's purchase of Procter & Gamble's Duracell battery unit.

The Commission said in a statement the proposed acquisition would not raise competition concerns given the absence of horizontal overlaps and the existence of numerous competitors in the vertically related market where the parties are active. [...]

Austbrokers faces major buffeting (Sydney Morning Herald)

Austbrokers, which takes up to 25 per cent of the first year's premium as a commission, is in trouble.

Berkshire intends to use its established position and substantial resources to sell commercial insurance online with a new initiative called Berkshire Hathaway Direct, cutting out brokers once and for all. Berkshire will focus on small to mid-size businesses – Austbrokers' bread and butter.

Until now, the company was protected by the complexity of insuring a business compared with an individual or car. Berkshire's decision to focus on internet-based, direct-to-customer commercial insurance suggests technology is now at a point where policies can be priced and written entirely online.

Italian Real Estate Agent Admits Buffett Greek Island Claims False (Newsweek)

On Monday, Proto Enterprises, a company owned by Italian real estate agent Alessandro Proto and based in London, claimed that the company had purchased St Thomas island along with Buffett, one of the world's richest men, for 15 million euros. The company added there were plans to develop real estate on the island, which is not far from Athens.

However, Buffett denied the claim on Tuesday, telling the Omaha World Herald newspaper, which is owned by Buffett's company, Berkshire Hathaway, by email that: "Until the reports started coming out, I had never heard of the guy who is making the claims about the Greek Island." [...]

On Wednesday, after the company gave conflicting accounts to the media, Newsweek received an email from the same address, claiming to be Alessandro Proto himself, admitting that the story had been fabricated and saying that the company's claims had been a "sociological experiment", orchestrated by him. Proto predicted a meeting between himself and Buffett, and an economic bounce for Greece as a result of his actions.

Learn to code like it’s the ’90s with Berkshire Hathaway’s normcore website (Quartz)

The website of Berkshire Hathaway is famously crude. You might even call it ugly. But look at the HTML code of this spartan “WEB page” and you’ll see that the best term for it is simply old school. It is a blast from the internet’s past. [...]

Maybe it’s a conscious choice. Berkshire Hathaway and chairman Warren Buffet’s down-home reputation gives shareholders confidence through nostalgia for simpler times, when investors really knew their companies and stuck with them. The website brings us back to a time when people really knew their websites, when they wrote HTML by hand, character-by-character. That is to say, this ’90s site is completely on-brand.