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Berkshire Hathaway Inc. Message Board

  • beststockpicker beststockpicker Jun 20, 1998 12:12 AM Flag

    Thoughts from the street

    The Warren Buffett Way took a strange turn late

    Long a cautious prowler of corporate
    combinations, Buffett announced a big play Friday: the
    acquisition of General Re (GRN:NYSE) in an all-stock deal
    valued at about $22 billion...

    Discussions of the
    deal began in May. But talks soon bogged down over
    valuations. Buffett said the companies resumed talks when the
    Citicorp/Travelers deal came to light. As with most Buffett mergers,
    it will remain business as usual at General Re. "My
    role will be just as it is with our other
    subsidiaries," said Buffett. "I have two jobs. One is to
    allocate capital and the other is to keep talented people
    motivated so they jump out of bed excited to do business
    each morning."

    The one change in the formula
    will cause General Re's investment portfolio to be
    managed primarily from Berkshire's headquarters in Omaha.
    "The capital of General Re will be managed from Omaha,
    as it is for our other subsidiaries," said Buffett.
    "The day-to-day operational decisions will be made
    just as they have been in the past, with a lot of
    encouragement from me."

    When asked if he the deal had
    any negatives for shareholder for Berkshire staff,
    Buffett was emphatic. "I don't see any downside

    "I think the deal has very good long-term
    strategic implications for Berkshire," said Jay Cohen,
    insurance analyst at Merrill Lynch who rates General Re
    "accumulate." He has no rating on Berkshire. Cohen, however,
    sees potential short-term disappointments if the
    reinsurance business remains soft. "Premiums have dropped
    slightly in General Re's property and casualty reinsurance
    business as they are very disciplined operators. While the
    access to Berkshire's capital is nice, it may be very
    difficult to use it very aggressively in the near term."

    Is Buffett a Bull?

    Reiterating his broad
    market view, Buffett said that he was having trouble
    finding many deals in the marketplace. "Right now we
    don't have lots of great ideas, we don't even have many
    good ideas" he said. "However, in the future we will,
    and we will deploy all we can into those good ideas
    when we have a chance to do so."

    Buffett also
    said the purchase of an insurance company should not
    signal that he has become bullish on the insurance or
    financial services sectors. "General Re is an exceptional
    company and this is a great deal," Buffett said. "We are
    not excited about the average insurance company and
    we're asked to look at lots of them. There are no other
    on our dance card."


    While Buffett insiders say he is terrified of the
    prospects of his death, every major deal Berkshire makes
    will be looked at as a possible combination to provide
    candidates to succeed him and Munger. However, Buffett said
    this deal had no such undertones. "Succession wasn't
    even in the back of my mind," Buffett asserted.
    "However, it was in the back of the minds of the folks at
    General Re. Gen Re wanted to consider fully the question
    of management succession at Berkshire over the
    years. They were fully satisfied of the stability of
    Berkshire [upon my death]. It was as good or better than
    anything they could see anywhere else in the world."

    When General Re's Ferguson, a spry 55 when compared to
    Buffett at 68, was asked if he was a candidate to succeed
    Buffett, he said it had never come up. "My job will be to
    run General Re and that's all," he said. Ferguson
    will become a member of the Berkshire Board of

    An Inside Leak

    Just minutes
    before the market's close, a General Re trade crossed
    the tape at $270 a share. However, the exchange
    killed the trade and removed it from the tape,
    indicating it was done in error. When asked about the
    transaction Ferguson indicated the deal had been kept under
    wraps as well as any deal he had ever seen. "We were
    very silent about the deal until after the close
    today," he said. "Both Joe [CFO Joseph Brandon] and I
    have watched t

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    • Great taste in music MISKA...especially the "oo."

    • my fav Zappa song was called "you're an
      asshole"... The first time I heard it was ALSO the first time
      I took LSD <weird night>

      Went to "The
      Firm" concert in Seattle. Jimmy Page & Paul Rogers.
      Cool show... They played in the coliseum, a building
      that CAN house up to 20,000 concert goers and there
      were only about 3000 people there. It was totally
      fucking cool. Just like a private show. Some guy jumped
      up on stage and gave Page a big hug. The band walked
      off stage for about 45 minutes but no one cared
      because we where all stoned.

      Steve Miller still
      lives in Seattle.

      SEATTLE rocks!!!


    • ... Led Zeppelin, Pink Floyd, Moody Blues, The
      Who... Great trippin' music (especially Floyd).

      think you are forgetting maybe... Bad Company, Jethro
      Tull, Aerosmith, Steve Miller Band And lets not leave
      out Frank Zappa!!! ("Watch out where the huskies go
      and don't you eat that yellow snow")

      for the off-topic remark, couldn't help it, thought
      the seventies got a very bad rap, musically. That
      disco crap really screwed up to whole decade.

    • A tax free transfer using inflated stock for more equity. Kind of like when they give stock as a gift and use the stepped up basis for the writeoff.


    • Question for ya: Why would WEB get an advantage by exchanging his personal BRK shares for GRN?

    • I agree that the books of Jim Grant are first rate.

    • I don't ever buy anything that he says to buy,
      because he is a perennial bear. However, his financial
      reporting and books that detail the facts are some of the
      best around. It is nice every once in a while to read
      something that isn't status quo.

    • If you're going to listen to Jim Grant, why not
      listen to Michael Metz, another of Wall Street's
      perrenial bears. Truth is, if you took either of these two
      "doomsayers" seriously over the last few years, you have been
      whacked pretty good in the old pocketbook--IMHO. Come on,
      Benton, I'll bet you really have been listening to these
      two, haven't you?

    • Actually I think you and I are largely in
      agreement. The only warning is for short term BRKB (not
      BRKA) and now GRN traders who might as one guy wrote
      sell the stuff now, get a profit and then go on to
      some new adventure like Amazon. I just mean you may
      then find (like today) BRKA going down and the
      corresponding BRKB and GRN with it at least short term after
      the euphoria wears off. My point is that it is not
      money in the bank but that is only a loss if you sell
      the ship in whatever form (BRKA, BRKB, GRN). One
      other note: I don't get (I guess for security reasons
      to have the Berkshire in the first place) why anyone
      would buy Berkshire and not GRN. But who knows...

    • "Doc-Even with the crash to it, look at the PE
      for CD."
      NEVER - I REPEAT NEVER rely on
      the P/E posted on Yahoo. Earnings for 1998 are
      estimated @ $1.15 for FY98 and $1.47 for FY99. Divide the
      share price ($21) by FY 98 earnings and tell me if it
      is even in the same world as Yahoo's posted P/E.
      Then do the same for FY 99. Then realize that FY99
      estimates represent a 28% increase in EPS vs. a foreard P/E
      of 14. So it trades at a 50% discount to its growth
      rate while most of the other S & P companies trade at
      ridiculous premiums to their single-digit growth-rates.

      And yes, I am as long CD as I am BRK.

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