M&A

Buffett Puts on a Party Hat


Warren Buffett, chief executive officer of Berkshire Hathaway, at a television interview in 2010

Photograph by Daniel Acker/Bloomberg

Warren Buffett, chief executive officer of Berkshire Hathaway, at a television interview in 2010

Berkshire Hathaway (BRK/B) is buying Oriental Trading, the tchotchke seller extraordinaire that sells a vast array of party supplies (happy face keychains or psychedelic paddleballs anyone?) and sends out catalogs with a, shall we say, impressive frequency. Warren Buffett, in a statement on the deal, said the company provides good value and will continue to grow in its “quest to make the world more fun.”

Berkshire paid $500 million for the company, Bloomberg News reports. That’s a tiny sum for Buffett, who’s sitting on about $40 billion in cash and told CNBC on Oct. 24 that he’s “salivating” to make a big buy. Buffett’s made huge acquisitions in recent years, including buying the chemical maker Lubrizol in early 2011 for $9 billion and paying $26 billion for Burlington Northern Santa Fe railroad in 2009. He said that low interest rates have increased competition and raised prices on big deals. Buffett prefers to buy companies in cash and stock, rather than doing deals with borrowed money—leverage—like some other investors. “People who do leverage are getting significant portions of the purchase price at very, very low rates, probably as low as they’ve ever gotten,” he said. “That enables them to bid pretty aggressively.”

Buffett told CNBC that two deals in the $20 billion range fell through recently—just what they were, he hasn’t said. But Buffett has made 26 smaller acquisitions in the past year, including newspapers, solar energy projects, and an organic materials manufacturer. Many are U.S. retail and industrial companies that show Buffett believes “there’s good value just betting on America,” says Tom Lewandowski, an analyst with Edward Jones. Yet Lewandowski says deals as small as Oriental Trading “just don’t move the needle” on a company as large as Berkshire, adding “they don’t fit into the Berkshire [of] this day and age.” He says the smaller deals were more apropos of the Berkshire of 25 years ago. “I tend to look at these as immaterial parts of a story,” he says, “but it is a consistent application of a strategy of his success over the long term.”

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Weise is a reporter for Bloomberg Businessweek in Seattle. Follow her on Twitter @kyweise.


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Companies Mentioned

  • BRK/B
    (Berkshire Hathaway Inc)
    • $151.54 USD
    • -0.21
    • -0.14%
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