FACTBOX: Berkshire's Buffett on succession, acquisitions

FACTBOX: Berkshire's Buffett on succession, acquisitions
Sat May 2, 2009 3:30pm EDT



(Reuters) - Berkshire Hathaway Inc, the insurance and investment company run by Warren Buffett, has been preparing succession plans for when the 78-year-old billionaire steps down. It also still hunts for acquisitions, preferably large.

In 2008 Berkshire spent $6.1 billion on acquisitions. It spent $4.5 billion for a 60 percent stake in Marmon Holdings Inc, which was owned by the Pritzker family of Chicago and makes such things as railroad tank cars, plumbing pipes, metal fasteners, and wiring and water treatment products used in residential construction. Berkshire later boosted its stake to 63.6 percent.

Berkshire also made a series of large investments in 2008, including $6.5 billion to help fund Mars Inc's purchase of chewing gum company Wm Wrigley Jr Co. It also invested $5 billion in Goldman Sachs Group Inc and $3 billion in General Electric Co.

Berkshire ended 2008 with $25.54 billion in cash. Buffett has repeatedly said he would like to keep $10 billion on hand.

The company is holdings its annual meeting on Saturday in Omaha, Nebraska.

The following information about Buffett's succession plans and Berkshire's acquisition strategy is drawn from the company's 2007 and 2008 annual reports:

BUFFETT ON HIS POTENTIAL SUCCESSORS (FROM 2007 REPORT)

"We have for some time been well prepared for CEO succession because we have three outstanding internal candidates. The board knows exactly whom it would pick if I were to become unavailable, either because of death or diminishing abilities. And that would still leave the board with two backups.

"We have indeed now identified four candidates who could succeed me in managing investments. All manage substantial sums currently, and all have indicated a strong interest in coming to Berkshire if called. The board knows the strengths of the four and would expect to hire one or more if the need arises. The candidates are young to middle-aged, well-to-do to rich, and all wish to work for Berkshire for reasons that go beyond compensation."

ACQUISITION CRITERIA (FROM 2008 REPORT)

"We are eager to hear from principals or their representatives about businesses that meet all of the following criteria:

(1) Large purchases (at least $75 million of pretax earnings unless the business will fit into one of our existing units),

(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are 'turnaround' situations),

(3) Businesses earning good returns on equity while employing little or no debt,

(4) Management in place (we can't supply it),

(5) Simple businesses (if there's lots of technology, we won't understand it),

(6) An offering price (we don't want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).

"The larger the company, the greater will be our interest: We would like to make an acquisition in the $5-20 billion range... We will not engage in unfriendly takeovers... We prefer to buy for cash, but will consider issuing stock when we receive as much in intrinsic business value as we give."

(Reporting by Jonathan Stempel in Omaha, Nebraska)





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