> Warren Buffett Blog: June 2018

Monday, June 25, 2018

Warren Buffett exits USG position

Warren Buffett is finally getting closure on a long-held investment he recently called disappointing.

USG agreed to a $7 billion buyout by Germany's Knauf after Buffett's Berkshire Hathaway threw its support behind a shareholder uprising. Berkshire is USG's biggest shareholder, with a stake of 31 percent, and had said earlier this year it would vote against USG's four director nominees after the company rebuffed an earlier Knauf bid.

Knauf is USG's second-largest shareholder. Chicago-based USG makes building materials such as drywall. Berkshire began acquiring the shares 18 years ago but the company has been troubled with bankruptcy and asbestos claims.

It emerged from bankruptcy in 2006 with Berkshire's help. But when the mortgage crisis hit, it needed a $300 million bailout from Berkshire in a deal that gave Buffett's conglomerate the chance to convert notes into shares.

In March, Berkshire said in a securities filing it offered its stake in USG to Knauf for $42 a share. The deal, announced Monday, values Berkshire's stake at $1.9 billion.

At last year's annual shareholder meeting, Buffett called the investment "disappointing." And last month, Buffett told CNBC it was the first time he can remember Berkshire voting against a director slate at one of its holdings. He said the directors "didn't represent our interests" about the decision to take that stance. "For 18 years, it has not worked out that well," he said.

The Berkshire Hathaway investment dates back to 2001, when Buffett helped the company out of bankruptcy with a loan that was later converted to a stake in the company’s equity so large that a wholesale acquisition of the entire company remained one of the few ways for Berkshire to exit the investment without pushing down the share price.

Thursday, June 7, 2018

Berkshire purchases Dallas Texas company - Ebby Halliday

Warren Buffett’s HomeServices of America Inc. had sealed the deal for the purchase of Ebby Halliday Cos.

But the 83-year-old CEO, who’s spent 60 years of her life at the Dallas-based residential real estate company, wasn’t just celebrating a big payday.

By one industry expert account, the Minneapolis-based real estate arm of Berkshire Hathaway might have paid as much as $100 million in an all-cash deal to expand its Texas spread in a bold way.

But even more important to Burleson was that she’d landed a buyer who promises to stay true to Ebby form.

“I’m an Ebby girl. I want what’s best for this company,” says Burleson, who started as Ebby’s part-time secretary in 1958.

“We used to have our management meetings around her dining room table — the three of us,” she says, referring to the late-great Ebby and Ron Burgert, Ebby Halliday’s chief financial officer, who’s sitting next to Burleson in a cramped meeting room of the iconic Little White House. “I want to keep her legacy alive.”

With the acquisition of the Ebby Halliday portfolio, HomeServices has nearly 42,500 real estate professionals operating in nearly 900 offices across 30 states, including Dallas-based Allie Beth Allman & Associates, which was acquired in 2015.

Tuesday, June 5, 2018

Too much corporate transparency may not always be a good thing

Warren Buffett shares his views on human weakness and how good intentions of transparency can end up hurting companies

"It's very seldom that publishing compensation accomplishes much for the shareholders. American shareholders are paying a significant price for the fact that they get to look at that proxy statement each year and see how much those top five officers are earning."

Buffett recalled the time he ran Salomon Brothers: "At Salomon, virtually everybody was dissatisfied with what they were getting paid, and they were getting paid enormous amounts of money. They were disappointed, not because of the absolute amount — they were disappointed because they looked at somebody else in the place and it drove them crazy."

"I would put it this way. Corporate CEOs, as a group, would be being paid a lot less money if proxy statements hadn't revealed how much other people were getting paid. It is only human to look at a bunch of proxy statements and say, 'Well, I'm worth more than that guy.' … No CEO looks at other proxy statements and comes away thinking, 'I should get paid less.'"