Berkshire Hathaway Class B Opportunity

Berkshire Hathaway Inc.(NYSE: BRK.A, BRK.B) recently announced that one of its subsidiaries, The McLane Company, entered into an agreement to acquire Kahn Ventures, parent company of Empire Distributors Incorporated and Empire Distributors of North Carolina, Inc. Berkshire Hathaway and its subsidiaries engage in diverse business activities. Among them are property and casualty insurance, utilities and energy, finance, manufacturing, retailing and services. Common stock of the company is listed on the New York Stock Exchange, trading symbols (NYSE:BRK.A and BRK.B.) Kahn Ventures, and its subsidiaries are wholesale distributors of distilled spirits, wine and beer in Georgia and North Carolina. The acquisition is subject to customary closing conditions, including awaiting the termination of the applicable time period under the Hart-Scott-Rodino Act.

Empire will continue to operate in the same cost efficient and professional manner it has for the past 70 years, led by the current management team and operating out of its facilities in all the same markets. The only change of note to Empire’s business will be access to improved resources and top line logistics process measures that will provide significant cost effective improvements and opportunity for increased levels of success for Empire, its suppliers and brands it distributes.

Warren Buffett, Berkshire’s Chairman and CEO commented that this acquisition was based on a shared vision of Berkshire, McLane and Kahn of developing new opportunities to innovate, grow and lead the beverage industry. The expectation is that the Empire acquisition will provide the opportunity for Berkshire through McLane a solid platform for potentially acquiring other similar high quality wholesale distributors in the future, should they become available.

McLane is a $32 billion supply chain services leader, providing grocery and foodservice supply chain solutions for thousand of c-stores, mass merchants, drug stores and military locations, as well as thousands of chain restaurants throughout the United States. Many of you have seen their Tractor Trailers at the local McDonalds or Seven Eleven unloading their cargo to those entities. With 38 distribution centers and one the nation’s largest private fleets, the company optimizes the purchase, flow and sale of products from thousands of suppliers to more than 60,000 locations.

The Spirits business is always a good business, whether the economy is good or bad. The acquisition should lead to leaner stronger more productive companies in the fold and a stronger Berkshire Hathaway as a result. This can also help offset the insurance businesses that are part of the mix, which will probably continue to have issues and slower if any growth. Other companies in the fold will also help offset any insurance industry issues, as there are still plenty of growing economies worldwide which connect to Berkshire Hathaway in some way.

 One should keep in mind that the value of Class B shares of Berkshire are always directly related to the current value of the class A shares. Since most average Americans don’t have a few hundred thousand dollars to commit to BRK.A shares, scooping up some class B shares doesn’t seem like a bad idea at all. One thing is for certain, Warren Buffet and his right hand man Charles Munger have continuously made money for investors. It would also be true that the people in their employ have learned a thing or two about what to look for when searching for an acquisition. Not to worry, when the time comes for the torch to be passed, David Sokol stands ready. Berkshire Hathaway has certainly taken its lumps over the past couple of years, and the recent 50 for 1 split of the class B has given new investors the opportunity to get involved if they missed previous opportunities to do so. Taking what was a roughly 3300 dollar shareprice down to around 66 or 67 dollars at the time it was enacted. Don’t take too long though to decide, the shares have been on a steady rise pretty much since the split, currently trading at or near 83 dollars. The split was the second time in the companys 45 year history under Warren Buffet’s leadership, that shares were offered more cheaply to the American public, the first time being back in 1996 when the class B shares were first offered. Berkshire Hathaway will outlive us all, even if Warren Buffet and Charlie Munger can’t.

Disclosure: Currently no position in Berkshire Hathaway