Berkshire's Munger says takeover prices too high

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Published May 03, 2013

| Reuters

OMAHA, Nebraska (Reuters) - Warren Buffett's Berkshire Hathaway Inc would be "stark raving mad" to rule out another giant acquisition like its 2009 Burlington Northern takeover, but high prices have made attractive targets scarce now, its vice chairman said on Friday.

In an interview with Reuters on the eve of Berkshire's annual shareholder meeting, Vice Chairman Charlie Munger said the company has over the years made many of its most desirable purchases in periods of "great catastrophes," but little appears on the horizon now.

"With interest rates at zero, the prices being paid for businesses are very high," he said.

Munger said Berkshire would welcome another purchase on the scope of its $26.5 billion takeover of Burlington Northern Santa Fe Corp in 2009.

"Everybody would like it," he said. "But just because you like it doesn't mean that the world will necessarily give it to you. You'd be stark raving mad if you were running Berkshire and didn't want another Burlington Northern. But how many Burlington Northerns have we done in 50 years?"

Berkshire's annual shareholder meeting in its hometown of Omaha, Nebraska, draws more than 35,000 people to the city. Buffett calls the meeting and the weekend's related events "Woodstock for Capitalists."

NO PLAN TO "OUT-APPLE" APPLE

Berkshire, which owns more than 80 businesses in such fields as car insurance, chemicals, energy and retail, could use the meeting this weekend to signal the direction it will take in the coming year.

Munger on Friday gave no indication that technology was likely to be a focus.

Despite a recent large investment in International Business Machines Corp , the company has long been underweight in technology companies such as Apple Inc , in which it has no reported stake.

When asked if Berkshire may consider an investment in Apple, especially now that Apple's share price has tumbled in recent months, Munger said: "The whole world admires the achievements of Apple. On the other hand, you could hardly think of another business that is more un-Berkshire-like than Apple."

"We really hate trying to invent whole new, novel technologies, one after another. We wouldn't be as good at it as Apple is," he said. "So we're not trying to out-Apple Apple."

Berkshire prefers larger, easy-to-understand businesses with consistent earnings power, good returns on equity and strong management.

Buying and investing in solid businesses has helped Berkshire outperform other companies during down periods for the economy, including 2002 and the deep recession in 2008 and 2009, Buffett has said.

Munger said the stimuli provided to the economy after the financial crisis was necessary, but said it is unclear how best to unwind it, including the Federal Reserve's "quantitative easing" policy known as QE3.

He called the bi-partisan response to the Great Recession "intense and extreme and it should have been," he said. "But now, knowing exactly when we should stop and how we get off the back of the tiger, I think everyone is a little confused including the people in charge."

(Reporting by Jennifer Ablan and Jonathan Stempel in Omaha, Nebraska; Editing by Frank McGurty and Bob Burgdorfer)

Warren Buffett's Berkshire Hathaway Inc would be "stark raving mad" to rule out another giant acquisition like its 2009 Burlington Northern takeover, but high prices have made attractive targets scarce now, its vice chairman said on Friday.

In an interview with Reuters on the eve of Berkshire's annual shareholder meeting, Vice Chairman Charlie Munger said the company has over the years made many of its most desirable purchases in periods of "great catastrophes," but little appears on the horizon now.

"With interest rates at zero, the prices being paid for businesses are very high," he said.

Munger said Berkshire would welcome another purchase on the scope of its $26.5 billion takeover of Burlington Northern Santa Fe Corp in 2009.

"Everybody would like it," he said. "But just because you like it doesn't mean that the world will necessarily give it to you. You'd be stark raving mad if you were running Berkshire and didn't want another Burlington Northern. But how many Burlington Northerns have we done in 50 years?"

Berkshire's annual shareholder meeting in its hometown of Omaha, Nebraska, draws more than 35,000 people to the city. Buffett calls the meeting and the weekend's related events "Woodstock for Capitalists."

NO PLAN TO "OUT-APPLE" APPLE

Berkshire, which owns more than 80 businesses in such fields as car insurance, chemicals, energy and retail, could use the meeting this weekend to signal the direction it will take in the coming year.

Munger on Friday gave no indication that technology was likely to be a focus.

Despite a recent large investment in International Business Machines Corp , the company has long been underweight in technology companies such as Apple Inc , in which it has no reported stake.

When asked if Berkshire may consider an investment in Apple, especially now that Apple's share price has tumbled in recent months, Munger said: "The whole world admires the achievements of Apple. On the other hand, you could hardly think of another business that is more un-Berkshire-like than Apple."

"We really hate trying to invent whole new, novel technologies, one after another. We wouldn't be as good at it as Apple is," he said. "So we're not trying to out-Apple Apple."

Berkshire prefers larger, easy-to-understand businesses with consistent earnings power, good returns on equity and strong management.

Buying and investing in solid businesses has helped Berkshire outperform other companies during down periods for the economy, including 2002 and the deep recession in 2008 and 2009, Buffett has said.

Munger said the stimuli provided to the economy after the financial crisis was necessary, but said it is unclear how best to unwind it, including the Federal Reserve's "quantitative easing" policy known as QE3.

He called the bi-partisan response to the Great Recession "intense and extreme and it should have been," he said. "But now, knowing exactly when we should stop and how we get off the back of the tiger, I think everyone is a little confused including the people in charge."

(Reporting by Jennifer Ablan and Jonathan Stempel in Omaha, Nebraska; Editing by Frank McGurty and Bob Burgdorfer)

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