Buffett's Berkshire misses out on $5B acquisition of Tech Data
Buffett does not intend to counter with a higher offer
Berkshire Hathaway is still sitting on a record pile of cash, after its CEO and Chairman Warren Buffett was thwarted in his attempt to buy Tech Data for $5 billion.
One week ago, Buffett said he bid $140 a share, or a little over $5 billion excluding debt, for the Clearwater, Florida-based Tech Data, according to CNBC. But the Oracle of Omaha lost out to a competing bid by private-equity firm Apollo Global Management for $145 a share, which values the company at about $5.14 billion. Apollo upped its initial offer of $130 a share, or just over $4.77 billion, after an unnamed suitor -- Berkshire -- topped it, CNBC reported.
Buffett said he does not intend to make a higher offer.
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Tech Data, which had $37 billion in revenue last year, is a global distributor of technology products and services, buying a wide range of services from manufacturers like Apple, Cisco Systems and HP. It is the No. 88 company on the Fortune 500 list of largest publicly traded companies and employs more than 14,000 people worldwide.
The company said the deal is expected to close in the first half of 2020, according to Reuters.
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According to Berkshire’s most recent quarterly earnings report, Warren Buffett’s sprawling conglomerate has a staggering $128.1 billion in cash and equivalents — a record amount — despite investing $10 billion in Occidental Petroleum Corp. in exchange for 100,000 shares of stock.
Despite holding so much cash — "far beyond" the level that Buffett and Vice Chairman Charlie Munger prefer — the company has struggled to make any major acquisitions since 2016, citing asking prices that are too high. Instead, the company has repurchased about $700 million of its own shares, something Buffett previously shunned.
Warren Buffett, Chairman and CEO of Berkshire Hathaway, smiles as he plays bridge following the annual Berkshire Hathaway shareholders meeting in Omaha, Neb., Sunday, May 5, 2019. (AP Photo/Nati Harnik) (AP Photo/Nati Harnik)
In May, Buffett told FOX Business’ Liz Claman the company’s cash pile expands by about $100 million per business day. At the time, he said he was searching the world for new investment opportunities.
“In terms of size, there are probably a dozen countries in the world that should have some companies that we would be interested in,” he said at the time.
Last year, in his annual letter to shareholders, Buffett blamed the prices on a buying frenzy driven in large part by CEOs who are cheered on by their boards. Once CEOs have a deal and asking price in mind, it’s difficult to sway their opinions, he said, comparing them to oversexed teens.
“Why the purchasing frenzy?” Buffett wrote in 2018. “In part, it’s because the CEO job self-selects for 'can-do' types. If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life.”