Warren Buffett’s Berkshire Hathaway Inc. agreed to buy closely held Oriental Trading Co., the biggest direct retailer of cut-price party supplies in the U.S.
The acquisition of the firm, based in Buffett’s hometown of Omaha, Nebraska, will be completed this month, Berkshire said Friday in a statement, without disclosing terms. Berkshire will pay about $500 million for Oriental Trading, the Wall Street Journal reported, citing a person close to the deal.
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.”
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.
‘Entrance Strategy’
KKR & Co., the private-equity firm 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 was a creditor to Oriental Trading and exchanged the debt for equity when the party-supply retailer emerged from bankruptcy.
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.
“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 decorations for holidays, through direct mail and its website. The firm offers more than 40,000 catalog items, including costume accessories, stickers and novelties such as glow-in-the-dark slime.
Lazard Middle Market advised Oriental Trading on the sale, Berkshire said.
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