Warren Buffett, chairman of Berkshire Hathaway, is on the lookout for big acquisitions. His comments to shareholders at the weekend suggest the company could spend more than $30 billion (€23.56 billion) over the next three years.
Mr Buffett told a crowd of 24,000 gathered in Omaha, Nebraska, for the company's annual shareholders' meeting on Saturday that he was working on one "low probability" acquisition worth $15 billion.
Some investors have expressed concern over whether Berkshire can deploy its $40 billion-plus cash pile effectively, and Mr Buffett has complained about a dearth of good deal opportunities. Berkshire announced a $4 billion cash deal to buy 80 per cent of Iscar Metalworking Companies, the private Israel-based tools business, on Friday - Berkshire's first purchase outside the US.
But Mr Buffett said he needed to find more and was looking inside and outside the US. "We'd be happier, much happier, if we had $10 billion of cash," he said, adding that it was likely Berkshire would have "a lot less" cash in three years' time.
Mr Buffett said he expected opportunities in the utility sector, where Berkshire owns 80 per cent of MidAmerican Energy, which recently completed the $5.1 billion acquisition of PacifiCorp. But he did not intend to do "dumb deals" for the sake of reducing Berkshire's cash balance. Overseas acquisitions like that of Iscar are also part of Berkshire's strategy to diversify away from dollar-based assets. "We like the idea of developing earnings power in other currencies," Mr Buffett said.
Separately, Mr Buffett said he still expected the dollar to weaken over time but his emphasis was shifting away from direct currency bets. The notional value of Berkshire's non-dollar currency contracts declined year-on-year from $21.8 billion to $5.4billion on March 31st.
Mr Buffett, the world's second-richest person after Microsoft's Bill Gates, a Berkshire board member and Buffett bridge partner, has an estimated worth of $42 billion, but draws a salary of only $100,000 a year.
He rarely appears in public so many view the annual meeting as a key opportunity for investors to hear sage investment advice. Many have made healthy gains from Berkshire stock, which has far outperformed benchmark indexes since Buffett took over the company in 1965.
The investor and Charlie Munger, his vice-chairman, spent several hours in a sports arena fielding shareholders' questions on investing, US social security and other topics.
On commodities, Mr Buffett said he detected speculative participation in the recent run-up in prices, particularly metals. He added that Berkshire had not benefited from the sharp rise in silver prices, in spite of at one time owning a lot of the metal."I bought it very early, I sold it very early. Other than that it was perfect," he said.
Mr Buffett also tackled the succession question, possibly part of the reason Berkshire's stock price - about $89,000 for a single class A share on Friday - has not moved much in two years. Mr Buffett is 75, Mr Munger seven years older. The chairman said Berkshire's board had three potential successors in mind and knew which one they would choose immediately if necessary. "Warren has kept the faith," said Mr Munger. "Do you really think he's going to blow it when it comes time to pass it on?"
Shareholders started lining up outside the Qwest Center in Omaha hours before the doors opened at 7 am. The meeting opened with an hour-long movie produced by Buffett's daughter, Susie, which featured ads for Berkshire companies.
- (Financial Times service, Reuters)
