Higher offer stops cash play by Warren Buffett
By Nicole Friedman
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.
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