Warren Buffett’s focus on U.S. takeovers are to lead him to Sysco Corp., according to his annual report. After the Standard & Poor’s 500 Index sank to the lowest level since 1996, Buffett told Bloomberg that he will most likely pursue U.S. deals. Buffett faces a rivalry of bidders who have suffered greatly from the credit crisis. Buffett however has $25.5 billion in cash to deploy.
Berkshire Hathaway Inc. suffered its biggest annual drop in book value since Buffett took over four decades ago. This is now leading the world’s most successful investor to seek for other acquisitions. Buffett has three companies that are among 50 companies that meet his standards: Sysco, North America’s largest distributor of food to restaurants; VF, the world’s biggest clothing maker; and Danaher, maker of Craftsman tools.
“Those are the kinds of franchises he likes,” said Scott Black, Boston-based president of Delphi Management Inc. who owns Sysco, VF and Berkshire shares.
Buffett plans to spend from $5 billion to $20 billion on an acquisition and prefers simple businesses with pretax profit of over $75 million. His annual filings state he prefers consistent earnings power, good ROE and little or no debt.
50 U.S. companies have that much market value and profit, an ROE exceeding 10% and a debt-to-equity ratio of less than 50% as presented by Bloomberg.
Berkshire owns 10 insurers including Geico and 67 other companies ranging from grocery-store supplier McLane Co. and clothing maker Fruit of the Loom Inc. to toolmaker Iscar Metalworking Cos. and electric utility MidAmerican Energy Holdings Co. Berkshire has $128.9 billion in stock-market value and had more than 246,000 employees on Dec.31.
Buffett has been criticized however of the book value slip of 9.6% of Berkshire and has been stated as the worst performance since he took control in 1965. Buffett is now said to buy companies in the same industries Berkshire operates.
Berkshire owns 6.9 percent of the fourth-largest U.S. bank Wells Fargo and may continue to increase stakes in companies currently owned.
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