Correct me if I'm wrong, but I'm getting pre-tax earnings of $3.91 per share. That's puts the deal's multiple at 18. Whatever happened to this comment from last year's annual meeting:
« Operating businesses – they have different characteristics. I would buy similar operating businesses at 9x pretax and maybe 10x pretax. Not EBITDA - which is nonsense, but only if similar characteristics. »
Right. Good point. Operating earnings averaged almost $5 for 5 years (I would feel silly playing gotcha with the 12 mo figure, sorry.) Still, 14x pretax, even giving Buffett lots of credit for Oracularity, is not appealing. I could stretch it to where he's paying 120 or even maybe 100 cents on the dollar, by exercising my credulity to the limit. Rather have the dollars. He screwed the pooch (shareholder) on this one is my call.
Possibly Buffett is somehow getting the better end of his deal with the LBO people, but I don't like deals where we have to assume smart people got screwed in order to see our upside. This looks like the COP and Gen Re purchases to me -- standard corporate overpaying coupled with vague talk about value.
There's one key upside that nobody on the board ever wants to hear, though.
Successor + Cash = Bad. Successor + Illiquid wholly-owned stuff = Maybe Ok.
(Successor + Cash - Dividend = Ow, ow, no! my money! bad lemmings! hands off!)
mornin jad, my guess, IF i'm right and uncle has two years to go, tops, i doubt he wants to leave the madrrasssaa with more than 30 billionish cash laying around. IF you want expert explainations on why he stole hnz, raed the experts bro.