Posts Tagged → Berkshire Hathaway
Breaking: Berksire(BRKB) offers to buy remaining 19.9% of Wesco
From the just-filed 13D
The original purpose of the purchases of the Shares, all of which occurred more than 30 years ago, was to increase the ultimate control by Blue Chip of Wesco. On August 25, 2010, Berkshire’s management determined to propose to Wesco a cash-stock election transaction in which it would acquire the remaining 19.9% of the shares of Wesco that it does not presently own in exchange for Berkshire Class B shares and/or cash valued at the book value per share of Wesco as of a time reasonably contemporaneous with the closing of such a transaction. Berkshire would intend to structure such a transaction so as to be tax-free to Wesco shareholders electing stock, subject to applicable limitations. Berkshire expects to discuss such a transaction with the independent directors of Wesco. Berkshire would only proceed with such a transaction if it is approved by the Board of Directors of Berkshire and the Board of Directors of Wesco (including a majority of the independent directors of Wesco), as well as by a majority of the shares of Wesco not owned by Berkshire voted at any meeting that may be called to consider such a transaction. Berkshire does not know whether any of these approvals will be obtained. If no transaction is agreed upon and approved, Wesco will continue to operate as it does presently as an 80.1%-owned subsidiary of Berkshire.
Highlights from Steak N Shake(SNS) Chairman Sardar Biglari’s 2009 Letter
- Image via Wikipedia
Steak N Shake(SNS) has posted the annual letter from Chairman Sardar Biglari. Biglari has made great progress with the company since taking over, swinging from a loss of $23 million in 2008 to a profit of $6 million in 2009. The capital structure has been greatly strengthened. After beginning the year with just $6.9 million in cash and $30.7 million in debt, the year ended with $54.4 million in cash and investments, and just $18.6 million in debt. The swing in cash was largely driven by a decrease in capital expenditure to $5.7 million, down from $31.4 million 2008 and $68.6 million in 2007.
The fear when slashing capital expenditure is a decrease in sales, but Q4 featured a 20% increase in customer traffic and a 10.1% increase in same store sales, the best quarter yet in the recent reversal of a multi-year tend of declining sales.
Biglari also announced a 1 for 20 reverse split, effective December 18, in order to discourage speculation in the stock, marking an interesting counter to Buffett’s recent decision to split Berkshire Hathaway B shares as part of the Burlington Northern acquisition.
Biglari reitierated that increasing intrinsic value is his only goal, and promised that “Rest assured, we
will fire ourselves if we fail to create value over time.” Towards this end, we are told again of the holding company structure and Biglari as the sole authority on allocating capital.
Biglari provides a brief history of his involvement with Western Sizzlin(WEST) and the upcoming merger, but does not mention his most recent move, the acquisition of a 9.9% stake in Fremont Michigan Insurance Corp(FMMH)
Biglari has produced impressive results in his short career, and it would appear that he is poised to build on his success and continue to deliver superior returns on capital.
Disclosure: I own shares in WEST,SNS, BRKB,and FMMH
Berkshire Hathaway Bags An Elephant
- Image by Getty Images via Daylife
For years, Warren Buffett has spoken of searching for an elephant of a transaction. Berkshire Hathaway’s(BRKA,BRKB) announcement today that it will be acquiring Burlington Northern Santa Fe(BNI) in a $44 Billion deal represents the final capture of an elephant that has been in Buffet’s sights for several years as Berkshire has consistently bought to acquire almost 22.6% of the company prior to today.
The deal will consist of 40% stock and 60% cash. That Buffett is paying with Berkshire stock says something interesting about his appraisial of Berkshire’s future prospects. Buffett has in the past lamented stock deals he’s done(in particular the General Re deal). Buffett stated that stock is included in this deal in order to provide tax free treatment for BNI shareholders. Using stock implies that Buffett believes that BNI will grow intrinsic value at a faster rate then the rest of Berkshire.
Also of note is that Berkshire will be splitting Class B shares 50-1 in order to be able to compensate even the smallest BNI shareholder in stock. Buffett has been notoriously resistant to splitting his stock. It will be interesting to see what impact this has on Berkshire. We believe it represents a significant step in Berkshire’s transition from an investment partnership run by Buffett to a global corporation that will thrive in a post-Buffett era. It is also likely that the split will pave the way for Berkshire’s addition to the S&P 500.
Disclosure: We own shares of Berkshire Hathaway
