Bloomberg News

Buffett Says ADM Is ‘Kind of Company We Look at’ for Deals

July 08, 2011

(Updates with options trading in sixth paragraph.)

July 8 (Bloomberg) -- Billionaire Warren Buffett may look at Archer Daniels Midland Co., the world’s largest grain processor, as his Berkshire Hathaway Inc. seeks more acquisitions.

ADM, based in Decatur, Illinois, is the “kind of company we look at,” Berkshire Hathaway Chairman and Chief Executive Officer Buffett said today on Bloomberg Television’s “In the Loop” with Betty Liu. General Dynamics Corp. and Exelon Corp. are also the types of companies he finds attractive, Buffett said in an interview from Sun Valley, Idaho.

Roman Blahoski, an ADM spokesman, declined to comment.

Buffett says Berkshire, based in Omaha, Nebraska, doesn’t currently have any acquisitions in the works, but he “hopes” to see a deal by the end of the year.

ADM rose 59 cents, or 1.9 percent, to $31.04 at 4:15 p.m. in New York Stock Exchange composite trading. The company, with a $19.8 billion market value, has risen 3.2 percent this year.

ADM’s bullish options volume surged to a four-month high as investors boosted wagers that the shares will extend gains. More than 44,000 calls to buy the stock changed hands, nine times the four-week average and quadruple the number of puts to sell. The most-active contracts were September $31 calls, which rose 34 percent and accounted for a third of all call volume.

Acquisition Criteria

ADM is among companies that meet the acquisition criteria listed in Buffett’s annual letter, according to data compiled by Bloomberg in March. Buffett typically prefers “simple” businesses with pretax profit exceeding $75 million, “consistent” earning power, and “good” returns on equity while employing little or no debt, according to his report.

As Berkshire has grown, Buffett has shifted his takeover strategy to focus on capital-intensive businesses, such as power producers and railroads, which require consistent investment in infrastructure and equipment.

Buffett’s son, Howard Buffett, worked at ADM from 1992 to 1995, serving as a director and the company’s head of investor relations.

ADM is expected to earn net income of $2.18 billion in fiscal 2011, up from $1.93 billion a year earlier, according to four analysts’ estimates compiled by Bloomberg. The company will report earnings for the fiscal fourth quarter, which ran through June, on Aug. 2.

--With assistance from Jeff Kearns in New York. Editors: Jessica Resnick-Ault, Steven Frank.

To contact the reporters on this story: Shruti Singh in Chicago at ssingh28@bloomberg.net; Betty Liu in New York at bliu17@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.


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