Berkshire Hathaway Inc.'s Warren Buffett often laments that his company has more cash than investment opportunities. Now, he's envisioning a $40 billion to $60 billion acquisition that would require him to sell stocks to free up funds.
"I would hope something would come along where I would have to sell something that I like to buy something huge I like even better," Buffett, Berkshire's billionaire chairman, said Sunday at a news conference in Omaha, Neb. He would "love" to find a $40 billion acquisition and would "figure out a way" to come up with $60 billion for the right deal, he said in a later interview.
Buffett, 76, built Berkshire over four decades, buying out-of-favor stocks and companies to transform it from a failing textile-maker into a $168 billion holding company in industries as diverse as insurance, ice cream and electricity. The firm, which has about $46 billion in cash, is as prepared as it has "ever been" to buy a "big business outright," he told shareholders at the company's annual meeting over the weekend.
One investment Buffett had to defend was Berkshire's $3.3 billion stake in PetroChina Co. Ltd. China National Petroleum Corp., owned by the Chinese government, holds 90 percent of PetroChina and interests in oil reserves and pipelines in Africa's Sudan. Leaders in Sudan have been accused of supporting genocide in the western region of Darfur.
College professors Judith and Gerald Porter of Ardmore, Pa., had introduced a resolution calling for Berkshire to sell its stake in PetroChina.
"We have no disagreement with what PetroChina is doing," Buffett told shareholders after announcing that the resolution was voted down by a margin of 53-1. "If there was a disagreement, it would be with what the Chinese government is doing."
Buffett invests premiums from subsidiaries such as Geico Corp., the fourth-largest U.S. car insurer, until claims need to be paid. Last year, Berkshire's MidAmerican Energy Holdings Co. bought PacifiCorp from Scottish Power P.L.C. for $5.1 billion in the firm's biggest deal since 1998.
"He's shouting from the rooftops: 'Bring me enormous deals. There's no deal that's too large for us to look at,' " said Whitney Tilson, a managing partner at New York-based T2 Partners L.L.C., which owns $30 million in Berkshire shares and options. "Let's say a $40 billion acquisition came along. He might need to raise $10 billion of additional cash. As an insurance company, he has to maintain plenty of cash to pay claims."
In the United States, Buffett would likely be interested in consumer products such as beer or candy companies, Tilson said. "In places like Brazil or Israel or many parts of Europe, some enormously large attractive businesses are still private," he said.
So far, the cash is coming in faster than the ideas, Buffett said. On Saturday, after 27,000 shareholders and admirers crowded Omaha's Qwest Center, he asked a gathering of overseas investors for their recommendations on potential acquisitions. His criteria: a business he understands, good economics, managers that can be trusted, and a price that makes sense.
Buffett's contrarian bets have helped Berkshire's shares increase about 3,600 percent since 1987, six times more than the New York Stock Exchange Composite Index, which measures all the companies on the Big Board. They rose $1,240, or 1.1 percent, to $110,490 yesterday in New York Stock Exchange composite trading. The stock dropped 0.3 percent this year, underperforming the 6.4 percent advance of the Standard & Poor's 500 index.
His annual meetings are as much a chance for admirers to hear the world's third-richest man opine about the economy, markets and other newsmakers as to be updated about Berkshire.