Buffett's $35B European Shopping Spree
As shopping trips go, this could be a big one. Warren Buffett, the billionaire US investor who controls Berkshire Hathaway, touched down in Germany yesterday to begin a four-day European tour he hopes will enable him to invest some of the $35bn (£18bn) cash pile on which the investment company is currently sitting.
Having told Berkshire investors last month that "we're nowhere near as prominent in Europe as we should be", Mr Buffett hopes what he describes as a "deferred shopping tour" will put that right.
The "Sage of Omaha" began his trip meeting executives from privately owned German companies in Frankfurt yesterday and moves on to Lausanne in Switzerland today. Tomorrow, he flies to Madrid, before heading back through duty-free in Milan on Thursday.
Mr Buffett said yesterday that he was most interested in medium-sized businesses, particularly family-run concerns because such enterprises often took a much longer-term perspective than executives with shareholders to answer to.
"We're looking for companies that have at least $50m to $75m in pre-tax profit — the bigger the better," Mr Buffett said. "It would be a good choice for them to contact us if they wanted to."
Only certain companies need apply, however. Mr Buffett's requirements are exacting — he invests in businesses with a clear competitive edge, that offer a good return on capital and are run by a trusted management team.
Mr Buffett said he believed he had come to the right place to identify such businesses, having run out of decent investment opportunities in the US.
"There are far more companies that would make sense for us to buy and for them to sell to us in Europe," he added. "In emerging markets there are going to be very, very few businesses that would be earning $75m — you want to fish in a pond where the fish are and Europe is a much better pond."
For those which take the bait, Mr Buffett is renowned for taking a distinctively hands-off approach to his investments, leaving managements free to make their own decisions and holding his stock for the long term — though not always for paying top dollar for acquisitions.
Eitan Wertheimer, who runs the Israeli company Iscar that is now owned by Berkshire Hathaway, said: "Many families go through stages of decision-making and they need to know their options — from Warren, you get much more than money, you're part of something unique."
Though Mr Buffett yesterday refused to name any particular targets, German and Swiss business circles in particular have been full of gossip in recent weeks about opportunities already identified. In Germany, the rumours have centred on Haribo, the sweetmaker, while Swiss possibilities include Swatch and Sonova, a manufacturer of hearing-aids.
One company very definitely not on the shopping list is RBS Insurance, the group of insurance businesses put on the market last month by The Royal Bank of Scotland. Mr Buffett said that he had already decided against making an offer.
"I have ruled out doing anything with the RBS group, which says nothing about the group — I just ruled it out," he said.