don't stop me now

Masayoshi Son's Piggy Bank Raid

The sage of SoftBank makes Warren Buffett look like an ascetic.
Photograph: StockFinland/Getty Images
SWISS RE AG
+1.32
At Closing, February 20th
96.38 CHF
BERKSHIRE HATHAWAY INC-CL A
+12.50
As of 11:47 AM EST
306012.50 USD

It's all about the money, and Japan's Masayoshi Son may just have found himself the ultimate piggy bank.

Warren Buffett, who used cash flows from insurance to help fund the deals that turned Berkshire Hathaway Inc. into a $500 billion powerhouse, has had no shortage of acolytes in recent years -- including a slew of Chinese billionaires. Add to the mix Son's SoftBank Group Corp., which is in talks to buy a minority stake in Swiss Re AG, one of the world's largest reinsurers.

With the cost of debt rising, it makes sense to buy into steady cash-generating businesses that can finance future acquisitions. SoftBank has almost $50 billion in debt coming due over the next six months, according to data compiled by Bloomberg -- in no small part due to Son's purchase of Sprint Corp., the weakest of the giant U.S. wireless carriers.

Swiss Re has net debt levels that even cash-rich Berkshire can only envy.

Cash Cow

Buying into Swiss Re would give SoftBank access to a company with extraordinarily low net debt

Source: Bloomberg

By buying into the 155-year-old reinsurer, SoftBank would get access to the Swiss firm's "float," or the money held by insurers to pay claims. That can be used to buy stocks, bonds and other assets.

SoftBank isn't new to insurance. As I wrote this week, the Japanese technology company might as well buy out Ping An Insurance (Group) Co. at the rate it's been piling into the Chinese giant's  "insuretech" offerings. It's also bought into Lemonade Inc., a New York-based startup that uses artificial intelligence and bots to speed up the claims process.

Swiss Re would provide a new pool of capital as other sources get tapped out. Son is floating his lucrative but low-growth Japanese telecom unit, a listing that could remove the conglomerate discount at which SoftBank stock trades by focusing investors on its stakes in Alibaba Group Holding Ltd. and other high-flying technology companies.

The plan would raise billions of dollars and create a listed entity that could be used as a further source of funds. SoftBank regularly pledges a large chunk of its stock in Yahoo Japan Corp. in exchange for loans. It's also considering how to raise billions more using ARM Holdings Plc, the money-losing U.K. chip developer Son bought two years ago, and its stake in Uber Technologies Inc. as collateral, according to The Information.

So why does Son want so much more money? He's already raised $93 billion of his planned $100 billion Vision Fund, the world's biggest private equity pool, which is struggling to find enough assets to buy. Its investments in an indoor kale-farming firm and a dog-walking startup (Pets.com, anyone?) have shades of the moonshot about them.

Insatiable Appetite

At a $10 billion valuation, a third of Swiss Re would rank among SoftBank's biggest deals

Source: Bloomberg

Note: The Didi Chuxing and Uber purchases included other investors so SoftBank's interest is less than the amounts shown.

The only answer is that Son's appetite for deals is insatiable. With SoftBank floating a 300-year time frame for development, he can afford to gorge.

Buffett has mostly sat on his hands recently because of a lack of meaningful acquisitions. That hasn't worried Son. His strategy seems to lie in the bigger-is-better school of business. More money means more investments, even if that means buying into Uber and its rivals. Scale equals invulnerability.

The market may not like his buying spree -- SoftBank shares have trailed the broader Japanese market in the past year. But for now at least, nothing's stopping him.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Nisha Gopalan in Hong Kong at ngopalan3@bloomberg.net

    To contact the editor responsible for this story:
    Matthew Brooker at mbrooker1@bloomberg.net

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