Berkshire needs ‘huge acquisitions’: Buffett
NEW YORK — Warren Buffett on Saturday lamented his inability to find big companies to buy, and said his goal is to make “one or more huge acquisitions” of noninsurance businesses to bolster results at his conglomerate Berkshire Hathaway Inc.
In his annual letter to Berkshire shareholders, Buffett admitted that finding things to buy at a “sensible purchase price” has become a challenge, and is a major reason Berkshire is awash with $116 billion of low-yielding cash and government bonds.
Buffett said a “purchasing frenzy” binge by deal-hungry chief executives employing cheap debt has made that task difficult. Berkshire typically pays all cash for acquisitions. “Our smiles will broaden when we have redeployed Berkshire’s excess funds into more productive assets,” Buffett wrote.
“Berkshire’s goal is to substantially increase the earnings of its non-insurance group. For that to happen, we will need to make one or more huge acquisitions.”
It has been more than two years since Berkshire made a major purchase, the $32.1 billion takeover of aircraft parts maker Precision Castparts Corp.
Last month, Buffett gave greater oversight of Berkshire’s noninsurance businesses such as the BNSF railroad, Precision Castparts and Dairy Queen ice cream to energy executive Gregory Abel, while insurance specialist Ajit Jain added supervision of insurance operations such as the Geico auto insurer. Both are considered candidates to eventually replace Buffett, 87, as Berkshire’s CEO. Many investors consider Abel, who is a decade younger than Jain, the frontrunner.
Berkshire on Saturday reported a record quarterly and annual profit, both of which received a $29.1 billion boost from the recent lowering of the U.S. corporate income tax rate, which reduced its deferred tax liabilities.
Fourth-quarter net income increased roughly fivefold to $32.55 billion, or $19,790 per Class A share, from $6.29 billion, or $3,823 per share, a year earlier, while annual profit rose 87 percent to $44.94 billion.