Berkshire Hathaway Inc is a diversified investment group which owns a huge collection of businesses engaged in broad range of different activities. One of the best known is Geico Insurance, but the others include multiple additional insurers as well as Fruit of the Loom apparel, BNSF Railway, MidAmerican Energy and PacificCorp, Shaw Industries carpets and flooring, HomeServices and Real Living realtors, Lubrizol chemicals, NetJets aircraft rentals, Dairy Queen restaurants and Benjamin Moore paints, among many many more. The group has large shareholdings in multiple US corporate giants including Apple (Berkshire's stake in this company alone is worth over $120bn), Coca-Cola, American Express and Bank of America. Berkshire serves as the main financial vehicle of the legendary "Sage of Omaha" Warren Buffett, the world's wealthiest stock picker. His net worth in early 2021 was over $101bn (although he has pledged to donate 99% of his assets to good causes upon his death). Other areas of interest for Berkshire include industrial manufacturing, wholesale distribution, auto dealerships and building products. Traditionally, the most important of Berkshire's holdings has always been in property and casualty reinsurance. However, more recently, Buffett has pushed into other areas. The purchase of railway company Burlington Santa Fe (BNSF) was the group's biggest ever in 2008, but other substantial deals have come thick and fast since then. In 2013, Berkshire supplied most of the ready cash for an even larger deal, the private buyout of food giant Heinz by private equity firm 3G Capital. Towards the end of 2014, Buffett agreed to acquire the free-standing Duracell battery business from P&G for around $2.9bn net. A few months later, Heinz announced plans for a reverse takeover of Kraft Foods. Berkshire remains the biggest shareholder in the combined Kraft Heinz Company with around 27%. However poor performance by that company left a huge dent in Berkshire's results in 2018. All the group's subsidiary companies are left to run independently of one another, with only limited interference or involvement from the central group. Buffett himself is 90 and his longstanding business partner Charlie Munger is 97. They are supported by joint vice chairmen Ajit Rain and Gregory Abel, who divide oversight of all subsidiary companies between them. In 2021, Buffett named Abel as his designated successor as CEO. Group revenues hit an all-time high in 2019 of $254.6bn, while net earnings soared to $81.4bn as a result of more than $57bn of gains on minority investments. Performance was significantly weaker in 2020, with revenues slipping to $245.5bn and net earnings to $42.5bn. Once again, investment gains contributed the largest share of earnings - almost three quarters - while all Berkshire's wholly owned businesses contributed profits of just $11bn between them.
Capsule checked 13th April 2021
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Marketer Moves 3rd May 2021: CEO designate named at Berkshire Hathaway. See Marketer Moves (members only).
Adbrands Weekly Update 25th Sep 2020: Berkshire Hathaway made a comparatively rare move back into the media industry, part-funding the acquisition by EW Scripps of ION Media for $2.65bn. Berkshire sold its biggest previous media asset - a collection of dozens of regional local newspapers - earlier this year. In recent years, Scripps too has divested what was once an extensive portfolio comprising newspapers, radio and cable networks. Instead it slimmed down to become mainly the umbrella for around 60 regional US TV stations. Now it has agreed to acquire the similarly focused ION Media. The deal will more than double Scripps' collection, adding 71 stations including local leaders in New York, Los Angeles and Chicago. The enlarged company becomes the #1 station operator in the US by a considerable margin. Berkshire agreed to acquire $600m of preferred shares in Scripps, as well as a warrant to buy up to $300m more at a later date.
Adbrands Weekly Update 10th May 2018: What goes up must also come down... President Trump's new tax reforms reduced the tax burden on US-based companies, but they coincided with tough new accounting rules that also require corporations to report unrealised investment gains and losses. That's great when the market is going up; not so much when the bears are in charge, especially for corporations whose primary business is in proprietary investing. Berkshire Hathaway reported a net loss of over $1.1bn for 1Q 2018, reflecting falls in the value of its $170bn investment portfolio since January. That compared to a $4.1bn profit a year ago. Chairman Warren Buffett had already warned that the rule changes would "severely distort Berkshire's net income figures and very often mislead commentators and investors". By contrast, operating profit, which excludes the impact of unrealised losses, jumped 49% to $5.3bn.
Adbrands Weekly Update 1st Mar 2018: America's gun laws have been in a bright and unwavering spotlight since the Parkland school shooting two weeks ago, and corporate responses to that horror finally began to filter through this week. More than 20 leading US brands have severed promotional ties and discount partnerships with the National Rifle Association in response to a social media campaign to which several survivors of the incident have given their support. They include Delta and United airlines, MetLife, Symantec, Best Western hotels and car rental operators Hertz, Avis and Enterprise. The NRA reacted to the outcry with (possibly ill-advised) outrage and defiance, accusing these brands of a "shameful display of political and civic cowardice" as well as a lack of patriotism. FedEx was one of the few companies to reject calls for a boycott. The NRA, it said, is one of hundreds of organisations with whom it has a discount partnership. "FedEx has never set or changed rates for any of our millions of customers around the world in response to their politics, beliefs or positions on issues." A few days later, however, FedEx's resolve seemed to have wavered a little, when it issued a new statement "clarifying" its position. It does not offer a discount to the NRA itself, but only to companies and individuals who are members. However, arch-rival UPS, it pointed out, does have a direct partnership with the NRA.
The furore puts companies in a difficult position. Even Warren Buffett, legendary investor and CEO of Berkshire Hathaway, but also a Democrat politically, weighed in on the issue. "I think it's a mistake to start getting personal views and trying to impose them on an organization," he told CNBC. "What the [boycott organisers] are doing is very admirable, but I don't think Berkshire should say we're not going to do business with people who own guns. I think that would be ridiculous." Perhaps the first truly constructive step forward came from retail chain Dick's Sporting Goods, which said it will no longer sell assault rifles or high capacity magazines at its Field & Stream specialist hunting goods subsidiary. Mainline Dick's stores had already stopped selling assault weapons in 2012 after Sandy Hook. Dick's also raised the age limit for purchase of any firearms in its stores from 18 to 21 years of age. Shortly afterwards, Walmart and Kroger's Fred Meyer chain followed suit in barring sales to under-21s. Both had already previously stopped selling assault weapons.
Adbrands Weekly Update 13th Oct 2016: Mars has taken full control of the Wrigley chewing gum business, buying out investment partner Berkshire Hathaway for an undisclosed sum. Mars teamed up in 2008 with billionaire Warren Buffett's investment vehicle to acquire Wrigley. Acting as financier to the deal, Berkshire contributed a total of $6.5bn to the purchase price. Around two-thirds of that sum was a loan to Mars, which has already been repaid. The remaining $2.1bn purchased a direct 20% stake in what then became a separate operating division combining Mars's sugar confectionery brands with Wrigley's gum brands. It has remained a separate legal entity from the main Mars business for the past eight years. Berkshire's preference shares in the business carried a guaranteed 5% annual return, which has netted that group around $840m to-date in dividends. The buyout allows Mars to consolidate Mars Wrigley with its main chocolate confectionery division.
Adbrands Weekly Update 20th Nov 2014: Procter & Gamble found a buyer for its Duracell battery business in the form of billionaire investor Warren Buffett. He has agreed to take over the standalone business from P&G for a net value of around $2.9bn. The deal is to be structured as a slightly unconventional but highly tax-efficient asset swap. Buffett's Berkshire Hathaway holding company already holds a shareholding in P&G, which it inherited when the packaged goods giant engulfed Gillette - a longtime Buffett favourite - for stock. It will surrender these shares, worth $4.7bn at current prices, back to P&G, which will in return inject $1.8bn in cash into the Duracell Company as a parting dowry. As a result, both companies avoid a sizeable tax penalty that would have been generated by a straight sale of assets. However some investors flagged up the deal as a vote of no confidence by Buffett in P&G itself, in that he would rather own a small maker of alkaline batteries than have shares in the world's biggest, but slightly challenged, packaged goods giant.
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