Berkshire Is Thwarted In Its Bid for Tech Data -- WSJ
November 30 2019 - 3:02AM
Dow Jones News
Higher offer stops cash play by Warren Buffett
By Nicole Friedman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 30, 2019).
Berkshire Hathaway Inc. offered about $5 billion for technology
distributor Tech Data Corp. last week, but it was outbid by Apollo
Global Management, said Warren Buffett, Berkshire's chairman and
chief executive.
The rare insight into a Berkshire deal that fell through
illuminates the challenges facing the Omaha, Neb., conglomerate as
it looks to spend its growing cash pile. Berkshire had a record
$128 billion in cash as of Sept. 30, and Mr. Buffett is eager to
spend it on acquisitions and large investments. But he is unwilling
to pay prices that he sees as unreasonably high, and the
competition from private-equity firms and other large investors is
fierce.
Tech Data late Wednesday said it has agreed to be acquired by
Apollo for $145 a share in cash, or slightly more than $5 billion
not including debt, a $15-a-share increase from Apollo's offer
earlier in November.
After Apollo made its earlier offer for Tech Data, Bank of
America approached Berkshire portfolio manager Todd Combs last week
on Tech Data's behalf about buying the company, Mr. Buffett said in
an interview. Mr. Combs is one of two portfolio managers at
Berkshire and a key lieutenant for helping Mr. Buffett make
investments and vet potential deals.
Mr. Buffett said he read the company's financial statements and
investor presentations and was immediately interested.
"It was our kind of business. It's one you can understand," Mr.
Buffett said. "I may not understand all of the products that they
sell and I may not understand what the customers who buy the
products do with them, but I do understand the middleman's
role."
Tech Data is a wholesale distributor of products, including
computer hardware, software, consumer electronics and cellphones.
It reported $91 million in net income in the quarter ended Oct
31.
Greg Abel, Berkshire's vice chairman for noninsurance business
operations and another of Mr. Buffett's top lieutenants, visited
Tech Data's headquarters in Clearwater, Fla., last Friday.
Berkshire then made an offer to buy the company at $140 a
share.
Tech Data's board of directors approved the deal, Mr. Buffett
said, but Apollo raised its offer this week. Berkshire famously
doesn't participate in bidding wars, and it declined to raise its
price.
Berkshire's role in the bidding was reported earlier by
CNBC.
Tech Data shares jumped 12% Friday to $144.89. Berkshire's
shares were little changed: Its Class A shares edged down 0.06% to
$330,495, while its more frequently traded Class B shares were off
0.1% at $220.30.
Representatives for Tech Data and Apollo declined to
comment.
By confirming Berkshire's role as the other bidder, Mr. Buffett
signaled to the market not to expect him to place another offer for
Tech Data. Another company could still top Apollo's offer, as the
agreement with Apollo allows Tech Data to solicit other bids until
Dec. 9.
Mr. Buffett was also reminding the market that Berkshire is
actively shopping for acquisitions and can quickly make decisions
and pay cash for companies it wants to buy.
Berkshire's last major acquisition was in 2016, when it bought
aerospace manufacturer Precision Castparts Corp. for about $32
billion. Berkshire also paid $2.8 billion for almost 40% of
truck-stop company Pilot Flying J in 2017, with an agreement to
increase its stake in the company to 80% in 2023.
A few of Berkshire's acquisition attempts have fallen through in
recent years. Berkshire backed an attempt by Kraft Heinz Co. to buy
Unilever PLC in 2017, which was rebuffed. That same year,
Berkshire's utility unit reached an agreement to buy Texas
power-transmission company Oncor, but it was outbid by Sempra
Energy.
Berkshire's biggest expenditure in recent years has been its
large stake in Apple Inc. Berkshire first bought shares in Apple in
2016. As of Sept. 30, it held about $57 billion in Apple stock, or
roughly 5.5% of the company.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
November 30, 2019 02:47 ET (07:47 GMT)
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