Berkshire to Buy Oriental Trading as Buffett Bets on Toys

Berkshire to Buy Oriental Trading in Buffett Party-Supply Wager
Warren Buffett, chairman of Berkshire Hathaway Inc., listens during an interview on the sidelines of the Allen & Co. Media and Technology Conference in Sun Valley, Idaho. Photographer: Scott Eells/Bloomberg

Warren Buffett’s Berkshire Hathaway Inc. agreed to buy closely held Oriental Trading Co., the U.S. direct retailer of party and craft supplies.

Berkshire will pay about $500 million for Oriental Trading, according to a person familiar with the transaction who declined to be identified because the details are private. The acquisition of the firm, based in Buffett’s hometown of Omaha, Nebraska, will be completed this month, Berkshire said today in a statement, without disclosing terms.

Buffett, 82, has been making smaller acquisitions as he searches for larger takeovers to expand the firm he built over four decades by buying stocks such as Coca-Cola Co. and companies including railroad Burlington Northern Santa Fe. The billionaire’s acquisitions this year include a food distributor, newspapers and a building insulation maker. The addition of Oriental Trading will add to Berkshire’s retail operations, which span jewelers to candy stores.

“We are delighted to have them join the Berkshire Hathaway family and continue their quest to make the world more fun,” Buffett said in the statement. “They have had several changes to ownership in the past, but OTC has a permanent home with Berkshire Hathaway.”

Buffett didn’t respond to a request sent to an assistant seeking further comment.

Retailer’s Recovery

Oriental Trading emerged from bankruptcy last year owned by investors who had previously held the party-supply seller’s senior debt, according to a statement that didn’t name the new shareholders. The firm filed for protection in 2010 as retailers were hurt by the economic slump and weak consumer confidence.

KKR & Co., the alternative-asset manager run by Henry Kravis and George Roberts, is the largest shareholder of Oriental Trading with a one-third stake through its asset-management business, said Kristi Huller, a spokeswoman for the New York-based investment firm. KKR provided the capital from its special situations fund, which takes stakes in distressed companies.

“We partnered with a strong management team that successfully stabilized the business after the financial crisis,” Jeremiah Lane, a member of KKR’s special situations team, said in an e-mailed statement.

Buffett said in 2010 that he has avoided buying companies from private-equity owners because they focus on an “exit strategy.” The billionaire keeps the firms he acquires as a part of Berkshire and has a preference for retaining management because they have a passion for the business and know it well.

‘Entrance Strategy’

“We have an entrance strategy,” he said in pre-recorded remarks broadcast at a San Francisco conference in 2010.

Private-equity firm Carlyle Group bought a 68 percent stake in Oriental Trading Co. in 2006 from Brentwood Associates.

Oriental Trading sells crafts and teacher supplies, as well as wedding favors and decorations for holidays, through direct mail and its website. The firm employs about 2,000 people and offers more than 40,000 catalog items, including costumes, stickers and novelties such as glow-in-the-dark slime.

Lazard Middle Market was Oriental Trading’s financial adviser and Debevoise & Plimpton LLP gave legal advice on the sale. Munger, Tolles & Olson LLP was Berkshire’s legal counsel.

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