Warren Buffett, who invested $23.9 billion for his Berkshire Hathaway Inc. in the third quarter, said the company could spend as much as $10 billion on its next acquisition.
Buffett, Berkshire’s chief executive officer, said today on his first visit to Japan that he potentially has $8 billion to $10 billion if he found the right investment, though he had no specific merger and acquisition plans currently.
“We like the A part better,” Buffett said in an interview with Bloomberg News in Fukushima prefecture in northern Japan, referring to a preference for acquisitions over mergers. “On the Lubrizol transaction I think we spent about $8.7 billion. We’d love another one like that — we can handle that. We can manage somewhat larger. We can handle a $10 billion deal very comfortably.”
Buffett, 81, has turned to stocks and takeovers this year after interest-rate declines limited returns in the bond market. He spent more than $10 billion on International Business Machines Corp. shares and on the takeover of Lubrizol Corp. Buffett, who is also chairman and head of investments, is seeking deals as Omaha, Nebraska-based Berkshire’s cash builds.
“It can be any place,” he said. “If I can find something here in Japan that was a business that I like and understood, like their competitive position, like the price, like the financial position, like the management, we would do that tomorrow.”
Berkshire’s investable funds were boosted in October by a $3.3 billion payment from General Electric Co. that ended Buffett’s 2008 financing deal with the Fairfield, Connecticut-based firm. Many of Berkshire’s units, including railroad Burlington Northern Santa Fe and Business Wire, are producing better results than last year, when the company posted about $13 billion of profit, Buffett said in September.
Buffett traveled to Japan to view a factory used by Berkshire’s tool-making unit, Iscar Metalworking Cos. He canceled a scheduled stop in March after a record earthquake in the country. Buffett, the world’s third-richest person, has visited China, South Korea and India in the last two years to promote philanthropy and scout investment opportunities.
He said he was unfazed by the recent scandal at Japanese camera maker Olympus Corp. and is looking for investment opportunities in the nation’s companies. Olympus said this month that it concealed losses by paying inflated advisory fees, raising concern among investors about corporate governance in Asia’s second-largest economy.
“We’re looking for companies that have some kind of sustainable competitive advantage,” Buffett said at a news conference earlier today. “The fact that Olympus happens here or Enron happens in the U.S. doesn’t affect our attitudes at all.”
Buffett’s biggest non-U.S. acquisition was in 2006 when Berkshire paid $4 billion for 80 percent of Iscar, based in Tefen, Israel. Berkshire holds stakes in South Korean steelmaker Posco, German reinsurer Munich Re and U.K. retailer Tesco Plc. Buffett has bullish equity-derivative bets tied to the Nikkei 225 Stock Average, the Euro Stoxx 50 Index, and the U.K.’s FTSE 100 as well as the Standard & Poor’s 500 Index in the U.S.
In February, Buffett told shareholders that Berkshire’s cash pile gave him an “elephant gun” to fund investments.
An investment in Jefferies Group Inc., the investment bank that lost more than half its market value this year, was not on the radar because it would be too small, said Buffett, who injected funds into Goldman Sachs Group Inc. and Bank of America Corp. after their shares plunged.
“I don’t know anything specific about Jefferies,” he said. “Jefferies would be small in terms of the size of investments.” Buffett said he looks to put at least $1 billion into one investment.
Leucadia National Corp., the largest holder of Jefferies stock, has partnered with Buffett in investment ventures including the 2009 purchase of Capmark, which was renamed Berkadia Commercial Mortgage. Buffett has said he was encouraged by the success of a 2001 deal with Leucadia to extend a $6 billion loan to Finova Group Inc., a Scottsdale, Arizona-based lender.
Berkshire’s cash fell 27 percent in the third quarter to $34.8 billion at the end of September as bets on Lubrizol and IBM joined investments in plant and equipment and the $5 billion purchase of Bank of America’s preferred shares and warrants. Berkshire, which gets the biggest portion of its profits from insurance units, keeps cash on hand to pay policyholder claims.
Iscar Chairman Eitan Wertheimer, who has described himself as Buffett’s “travel agent,” helped arrange the visit in Japan. In 2008, Wertheimer worked with Angelo Moratti, vice chairman of Saras SpA, to plan a trip to Germany, Spain and Switzerland, where Buffett promoted Berkshire as a buyer for family-run businesses.
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