May 9, 2006 in Business

Acquiring minds

Associated Press The Spokesman-Review
 
Associated Press photo

Warren Buffett rides a stuffed bull at the Berkshire-owned Justin Boots booth before the Berkshire Hathaway shareholders’ meeting.
(Full-size photo)

OMAHA, Neb. — Billionaire Warren Buffett said his investment company, Berkshire Hathaway Inc. is willing to buy companies anywhere in the world if the circumstances are right.

Berkshire announced its first purchase of a company based outside the United States Friday, paying $4 billion for an 80 percent stake in a privately held company based in Israel, Iscar Metalworking Co.

Buffett and Berkshire vice chairman Charlie Munger said at Berkshire’s annual meeting later in the weekend that the acquisition of Iscar Metalworking probably won’t be the last foreign purchase for the Omaha-based company.

“There are dozens of countries in which we would be happy to buy the right business,” Buffett said.

During Sunday’s news conference Buffett and Munger especially praised Korean and Japanese businesses. A day earlier, Buffett and Munger spent more than five hours answering questions at the company’s annual meeting.

“Our problem outside the United States is we aren’t all that well known,” said Munger, 82.

Both men said they hope Berkshire’s announcement of the Iscar acquisition will help raise the company’s profile overseas. Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility firms. And it has major investments in such companies as H&R Block Inc., Anheuser-Busch Cos. and Coca-Cola Co.

Buffett and Munger said they have a financial incentive to shop overseas.

“We don’t find screaming bargains in the United States anywhere,” Buffett said.

Berkshire does own securities in Europe but Buffett said the company won’t disclose them until it has to.

Buffett said Berkshire’s criteria for foreign investments doesn’t differ from the list that has been published in the company’s annual report for years. Berkshire is interested in simple businesses with at least $75 million in earnings, a proven track record, management in place and an offering price. Iscar Metalworking makes precision cutting tools.

But Munger said there are some additional considerations.

“We don’t like kleptocracies,” Munger said. A kleptocracy is a country where theft is common in government and business, he said.

“We need a rule of law,” Munger said.

The 75-year-old Buffett again faced questions about who will follow him as Berkshire’s chairman and chief executive. Previously, Buffett has said that his son, Howard, should be the next chairman and that the board has agreed who the next chief executive should be.

Buffett again refused to identify the person the board chose from among three Berkshire managers to be the next chief executive.

The four Berkshire managers that keep coming up as possible chief executives are: Ajit Jain, who runs Berkshire’s reinsurance division; GEICO chief executive Tony Nicely; Richard T. Santulli of NetJets; and David Sokol, CEO of Iowa-based utility MidAmerican Energy.

Buffett said Howard Buffett should be Berkshire’s next chairman to help protect the company’s culture, but he said it will be up to the board to elect the next chairman and he’ll be dead when that happens.

“I won’t be there,” Buffett said. “On that day there will be 10 directors instead of 11.”

Buffett pledged to find good uses for the $42.9 billion cash the company held at the end of the first quarter, on March 31. He said that in a year or two, Berkshire may not have nearly as much cash, but he doesn’t feel pressure to make what could prove to be bad deals.

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