Buffett Will Be Bigger Force in Deal Financing After Occidental
(Bloomberg) -- Warren Buffett said he’d like his company to deploy much more than $10 billion to help companies pursue acquisitions in the next couple of years.
Days after Berkshire Hathaway Inc. agreed to inject $10 billion of preferred equity in Occidental Petroleum Corp. to help finance an acquisition of Anadarko Petroleum Corp., Buffett said he’d like to put more cash to work that way, whether the next one comes along in a month or three years.
"It won’t be identical, I hope it’s larger," he said Saturday at Berkshire’s annual meeting in Omaha, Nebraska. "If there are any $10 billion or $20 billion or maybe even $50 billion two-day transactions that are needed in the world, believe me they’ll think of Berkshire Hathaway for sure."
Berkshire has made similar investments in the past, committing $3 billion to Dow Chemical Co.’s purchase of a chemicals maker in the midst of the 2008 credit crisis, and another $6.5 billion for Mars Inc.’s takeover of Wm. Wrigley Jr. Co. that same year.
Buffett has seen his firm’s hoard of cash and U.S. Treasuries build to $114.2 billion at the end of the first quarter, and that has dragged on the company’s overall performance. He has been looking for fresh ways to put that money to work, including seeking new acquisitions in Europe.
By committing financing for deals, Berkshire could partner or compete with banks which collect billions in fees for arranging debt and equity to fund takeovers. Berkshire has stakes in major banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co., some of the biggest in that market. In the case of Occidental, Buffett was informed of the opportunity by Bank of America Corp. Chief Executive Officer Brian Moynihan.
Private equity firms including KKR & Co. have also gotten bigger in the deal financing market, while other billionaire-backed entities like the Koch brothers’ Koch Equity Development have also been seeking yield from the business. Buffett pitched Berkshire’s ability to get deals done quickly as the main reason for him to be the first call for such transactions.
"I can get a call on Friday afternoon and they can make a date with me on Saturday, and on Sunday it’s done," he said.
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