Warren Buffett’s Berkshire Hathaway sold Kirby after 35 years. The vacuum-cleaner company generated 5% of Berkshire’s profits at one point

Warren Buffett
Warren Buffett.

  • Warren Buffett’s Berkshire Hathaway sold Kirby after 35 years of ownership.
  • The investor bought Scott Fetzer, the vacuum-cleaner brand’s parent company, in 1986.
  • Kirby once generated 5% of Berkshire’s profits, and Buffett ranked it among his best businesses.
  • See more stories on Insider’s business page.

Warren Buffett’s Berkshire Hathaway recently sold Kirby after 35 years of owning the vacuum-cleaner company. The famed investor’s conglomerate rarely sells businesses, and Buffett once prized Kirby as one of Berkshire’s best subsidiaries, making the transaction a notable one.

Berkshire sold Kirby to Right Lane Industries, an industrial holding company that seeks to acquire US-based manufacturing and industrial-services companies, invest in them, and hold them permanently. That strategy chimes with Berkshire’s promise of a “forever home” for the businesses it buys.

Before its sale to Right Lane, Kirby was a division of Scott Fetzer, a manufacturing conglomerate that Berkshire purchased in 1986. Buffett trumpeted the direct seller of vacuum cleaners as one of Scott Fetzer’s crown jewels in his 1985 letter to Berkshire shareholders.

“While the Kirby product is more expensive than most cleaners, it performs in a manner that leaves cheaper units far behind (‘in the dust,’ so to speak),” Buffett said. “Many 30- and 40-year-old Kirby cleaners are still in active duty. If you want the best, you buy a Kirby.”

Moreover, Buffett once counted Kirby as one of “The Sainted Seven” among Berkshire’s non-insurance businesses, along with the likes of See’s Candies and Nebraska Furniture Mart.

“This divine assemblage … is a collection of businesses with economic characteristics that range from good to superb,” the investor said in his 1989 letter. “Its managers range from superb to superb.”

Buffett was right about Kirby’s stellar prospects. The company’s annual pre-tax earnings almost tripled to $59 million between 1986 and 1996, and Berkshire’s net earnings from Kirby nearly quadrupled to $40 million over the same period.

Moreover, Kirby generated more profit than all but one of Berkshire’s 10 non-insurance businesses in 1996, and was responsible for about 5% of the conglomerate’s operating earnings that year.

It’s unclear why Scott Fetzer decided to dispose of Kirby, a company it owned for more than 50 years and partnered with for more than a century. Berkshire Hathaway, Scott Fetzer, Right Lane, and Kirby didn’t immediately respond to requests for comment from Insider.

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Five9 spikes as Zoom announces massive $14.7 billion deal to acquire cloud-based call center operator

Eric Yuan
  • Five9 soared as much as 15% early Monday following a deal to be acquired by Zoom Video Communications.
  • Zoom shares were lower after announcing the $14.7 billion all-stock transaction.
  • Zoom’s deal will serve as its entry into the $24 billion call center market.
  • See more stories on Insider’s business page.

Shares of Five9 jumped as much as 15% on Monday on a deal by Zoom Video Communications to buy the cloud-based call center software maker in an all-stock transaction valued at $14.7 billion, building on Zoom’s business which has boomed during the coronavirus pandemic.

Zoom in a joint statement said the deal will be its entry into the $24 billion contact center market and will boost its presence with enterprise customers. Five9 has more than 2,000 customers worldwide and it said it facilitates billions of customer engagements each year. Five9 stockholders will receive 0.5533 Class A shares of Zoom for each share of Five9 they own.

Five9 climbed 7.8% after stepping up by 15% to $196.99 in premarket trading. Shares of the company, which went public in April 2014, were on course to trade at all-time highs. The stock has risen by about 50% over the past 12 months.

Meanwhile, Zoom stock was down 2% early Monday but has picked up 35% over the last year alongside its leap in business as millions of people worldwide took up videoconferencing for work and studying remotely because of the COVID-19 health crisis. The company, based in San Jose, California, in March posted a 326% spike in revenue to $2.65 billion.

“Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers,” Eric Yuan, Zoom’s founder and CEO, said in a statement.

Zoom and Five9 expect the deal to close in the first half of 2022, subject to approval by Five9’s shareholders, among other conditions.

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Bill Ackman’s PSTH scraps Universal Music deal after SEC pushback -but the billionaire investor is still buying a stake

Ackman, Bill Ackman
Bill Ackman.

  • Bill Ackman’s PSTH won’t buy 10% of Universal Music for about $4 billion after SEC pushback.
  • The billionaire investor’s Pershing Square funds will purchase a stake in Universal instead.
  • PSTH now plans to pursue a conventional SPAC transaction.
  • See more stories on Insider’s business page.

Bill Ackman has scrapped his plan to buy 10% of Universal Music for $4 billion using his special-purpose acquisition company (SPAC) after federal regulators poured cold water on the proposed transaction, the billionaire investor told Pershing Square Tontine Holdings (PSTH) shareholders in a letter on Monday.

PSTH will transfer its share-purchase agreement to Ackman’s Pershing Square company and its affiliates, the investor wrote. That way, he still becomes a shareholder and Universal-owner Vivendi won’t be “left at the altar,” he added.

The SPAC’s board unanimously decided on Sunday to ditch the Universal deal after speaking to the SEC and realizing the agency would probably nix it. PSTH’s directors will now focus on completing a conventional SPAC deal, and have 18 months to close one unless shareholders vote for an extension.

Ackman was caught off guard by the backlash from some PSTH shareholders to the complexity and structure of the original deal, he noted in his letter. The investor also underestimated its potential impact on investors who can’t hold foreign securities, margin their shares, or own call options on PSTH stock, he added.

Before the SEC dashed his hopes, Ackman envisaged PSTH shareholders receiving Universal shares after Vivendi takes the division public this September, continuing to own PSTH stock while the SPAC sniffs out a merger free of the usual time constraints, and securing rights to buy shares in a new investment vehicle called a SPARC once it agrees its own transaction.

PSTH’s withdrawal from the Universal deal will disappoint some of Ackman’s fans, who spent seven months speculating about the identity of his acquisition target. Others who weren’t thrilled at the Universal deal might welcome the SPAC hitting the reset button on its search.

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Hershey’s company jet flew to Warren Buffett’s hometown, sparking speculation that the investor could buy the candy company

Warren Buffett makes Sees Candies
Warren Buffett.

  • Hershey’s company jet made a rare trip to Warren Buffett’s hometown of Omaha, Nebraska.
  • The candy group’s bosses may have discussed a sale with the investor, an analyst speculated.
  • Buffett’s Berkshire Hathaway owns See’s Candies and financed Mars’ purchase of Wrigley.
  • See more stories on Insider’s business page.

Hershey’s corporate jet recently flew to Warren Buffett’s hometown of Omaha, Nebraska. The candymaker’s bosses may have visited the Berkshire Hathaway CEO to discuss a potential sale, an analyst who correctly predicted a past Buffett deal speculated in a note to clients last week.

The Hershey plane made its first trip to Omaha in at least a year on June 12, Don Bilson, the boss of Gordon Haskett’s event-driven research team, revealed in the note. The plane “stayed in Omaha for a couple of days which is certainly enough time for anyone who made that trip to pay the Big Guy a visit,” Bilson wrote, citing jet-tracking data.

Of course, Hershey’s plane may have landed in Omaha for other reasons. For example, Olympic swimming trials took place on the dates it was in the city, Bilson said. Hershey’s and Berkshire declined requests for comment from CNBC.

Bilson has sniffed out deals before. For example, he spotted that Occidental Petroleum’s corporate jet had visited Omaha in 2019, leading him to correctly predict that Buffett would help finance Occidental’s takeover of Anadarko Petroleum.

Buffett has bet on confectionery companies before. He famously acquired See’s Candies in 1972, and later described the seller of boxed chocolates as his “dream business.” The investor also shelled out $6.5 billion to help Mars purchase Wrigley during the financial crisis. He quipped at the time that he had conducted a “70-year taste test” on the pair’s products, and they had passed.

“We have long thought that he was the perfect buyer for Hershey,” Bilson and his team wrote in their note. “More than that, he may be the only realistic buyer who would win approval from the Hershey Trust.”

The Hershey Trust commands over 80% of Hershey’s voting rights, meaning a suitor would have to secure their support to buy the chocolate company. Buffett has acquired family-owned businesses such as Nebraska Furniture Mart by offering them a permanent home at Berkshire and promising minimal interference in their operations.

Hershey’s market capitalization is about $36 billion, meaning it’s within Buffett’s price range. The Berkshire chief, who has been hunting for an “elephant-sized acquisition” for years, said in May that he’s willing to deploy up to $80 billion of his company’s cash. However, he also ruled out any near-term takeovers because special-purpose acquisition companies (SPACs) and private equity firms would outbid him.

Buffett has also praised Hershey in the past, describing it as a “wonderful business” and powerful hedge against inflation at Berkshire’s 2007 shareholder meeting.

“If you own Coca-Cola, if you own Snickers bars, if you own Hershey bars, if you own anything that people are going to want to give a portion of their current income to keep getting, and it has relatively low capital investment attached to it so that you don’t have to keep plowing tremendous amounts of money in just to meet inflationary demands, that’s the best investment you can probably have in an inflationary world,” he said.

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Warren Buffett just donated $4.1 billion of Berkshire Hathaway stock – yet he owns more of his company now than he did a year ago

warren buffett
Warren Buffett.

  • Warren Buffett donated $4.1 billion of Berkshire Hathaway stock to charity this week.
  • The investor’s stake in Berkshire has still grown from 15.5% to 15.8% over the past year.
  • Berkshire has ramped up share buybacks, increasing Buffett’s ownership of his company.
  • See more stories on Insider’s business page.

Warren Buffett gifted $4.1 billion of Berkshire Hathaway stock to good causes on Wednesday, yet he owns more of his company today than he did a year ago. Stock buybacks explain that disconnect.

The famed investor’s stake in Berkshire has grown from 15.5% last July to 15.8% today, thanks to the conglomerate ramping up share repurchases. It plowed around $18 billion into buybacks in the second half of 2020, $6.6 billion in the first quarter of this year, and an estimated $6.5 billion of repurchases this quarter so far. It has spent about $38 billion in total on repurchases since the start of last year.

The latest $6.5 billion outlay is based on Buffett’s disclosed Berkshire stake in a regulatory filing this week. We calculated the approximate number of outstanding shares using that information, and subtracted that figure from the share count at the end of March. We then multiplied the decline in shares by Berkshire’s average share price over the past 12 weeks to estimate how much the buybacks cost.

It appears that Berkshire has reduced its outstanding shares by about 5% over the past year, while Buffett parted with around 4% of his Berkshire stock to make his latest charitable contribution. As a result, he now owns more of the company, despite holding fewer shares.

Buffett has celebrated the ability of buybacks to passively increase ownership in the past. “I love the idea of having our 5%, or whatever it may be, grow to 6% or 7% without us laying out a dime,” he said about Apple’s share repurchases at Berkshire’s annual meeting in 2018.

The investor highlighted in his latest annual letter that Berkshire’s Apple stake has grown from 5.2% to 5.4% since it established a position in mid-2018, even though Buffett and his team sold about 6% of their holding for $11 billion last year. Moreover, he pointed out that Berkshire’s own share repurchases have boosted its shareholders’ indirect ownership of Apple, the biggest position in Berkshire’s stock portfolio by far.

“The math of repurchases grinds away slowly, but can be powerful over time,” Buffett said in the letter. “The process offers a simple way for investors to own an ever-expanding portion of exceptional businesses.”

Buffett’s rising ownership of Berkshire despite his latest act of philanthropy is a great example of that process in action.

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Hedge fund manager Bill Ackman’s mega-SPAC seals $4 billion deal to buy 10% of Universal Music

bill ackman
Bill Ackman.

  • Bill Ackman has agreed a deal to buy 10% of Universal Music Group for about $4 billion.
  • Ackman’s Pershing Square Tontine Holdings will remain a public company following the transaction.
  • Shareholders are set to have UMG and PSTH shares plus the chance to back a new investment vehicle.
  • See more stories on Insider’s business page.

Bill Ackman’s pitch to buy 10% of Universal Music Group (UMG) for about $4 billion has been accepted, the billionaire investor announced on Sunday. He also confirmed his intention to pursue two more multibillion-dollar deals, paving the way for fresh intrigue after seven months of speculation about his original target.

Ackman’s Pershing Square Tontine Holdings (PSTH), a special-purpose acquisition company (SPAC), will purchase the minority stake in Drake and Billie Eilish’s record label from its parent company, Vivendi. The French media conglomerate intends to list UMG on the Euronext Amsterdam Exchange in September, and PSTH shareholders are set to receive their shares in the music group before the year ends.

“When the transaction is completed, our shareholders will directly own 10% of the common stock of an independent, publicly traded, large capitalization, extraordinary business with a superb management team,” Ackman and his team wrote in a presentation about the deal.

Unusually, PSTH will remain a public company after the transaction, and seek to deploy as much as $2.9 billion on another business combination. Ackman and his team are already searching for a compelling target, they said.

PSTH shareholders are set to receive UMG shares, continue to own PSTH shares, and will also be handed warrants to buy shares of a special-purpose acquisition rights company (SPARC) for $20 a pop. The SPARC, which hasn’t been approved by regulators yet, could be armed with up to $10.6 billion to pursue a separate business combination.

Ackman’s SPARC is similar to a SPAC, but it doesn’t let investors buy its shares until it has struck a deal. As a result, it doesn’t tie up their capital while it searches for a business combination, and also escapes the pressure of having to close a transaction within two years.

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Canadian cannabis giant Cronos is making moves to enter the US. Its $110 million deal with PharmaCann would give Cronos access to New York’s $7 billion market.

marijuana cannabis
Employees tend to medical cannabis plants at Pharmocann, an Israeli medical cannabis company in northern Israel.

  • New York is shaping up to be the next hot spot for cannabis M&A.
  • Canadian cannabis giant Cronos recently struck a deal with private US company PharmaCann.
  • PharmaCann is one of the few cannabis companies operating in New York.
  • See more stories on Insider’s business page.

As New York’s recreational cannabis industry shapes up, companies are making deals to take full advantage of the emerging market.

On Monday, Cronos Group, a Canadian cannabis company backed by Altria, said it agreed to make a “strategic investment” in US cannabis company PharmaCann, which has operations in New York. Cronos paid $110.4 million for an option to acquire a 10.5% ownership stake in PharmaCann, once cannabis is federally legal in the US.

PharmaCann is privately owned and operates in six states: New York, Illinois, Ohio, Maryland, Pennsylvania, and Massachusetts.

Canadian companies have been vocal about their intentions to enter the US market as soon as they’re able to do so. Cannabis, though legal for medical use in 36 states and adult use in 16 states, is still considered a Schedule I drug by the US federal government.

Canopy Growth, the largest cannabis company in Canada, has deals with two US cannabis companies – Acreage Holdings and TerrAscend – that would let it target US cannabis consumers once the market opens up to it. Alcoholic-beverages giant Constellation Brands owns a large stake in Canopy.

Once New York’s cannabis market ramps up, annual sales could reach $5 billion to $7 billion, according to estimates from analysts at Stifel and Cantor Fitzgerald, respectively.

The Cronos-PharmaCann deal comes a few months after US cannabis company Ascend Wellness said it would take a majority stake in MedMen’s New York operations for $73 million.

Several other cannabis companies are also likely targets in the lucrative New York market.

Click here to read more about the deals you can expect in New York as the state legalizes cannabis. This article is available exclusively to Insider subscribers.

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Shell considers selling assets in the largest US oil field, Reuters reports, highlighting pressure to focus on low-carbon investments

FILE PHOTO: Ben van Beurden, chief executive of Royal Dutch Shell, speaks during a news conference in Rio de Janeiro, Brazil, February 15, 2016. REUTERS/Sergio Moraes/File Photo
Royal Dutch Shell Chief Executive Ben van Beurden.

  • Royal Dutch Shell is reviewing its holdings in the Permian Basin, Reuters reported on Sunday.
  • That may mean Shell sells some or all of its 260,000 acres in the oil field, Reuters reported.
  • Shareholders and activists have pressured oil corporations to reduce their carbon footprints.
  • See more stories on Insider’s business page.

Giant oil corporation Royal Dutch Shell is considering shedding some or all of its assets in the Permian Basin, Reuters reported on Sunday, underscoring the pressure Shell and its competitors are under to focus on transitioning to a carbon-neutral economy and combat climate change in the coming decades.

The Netherlands-based company has some 260,000 acres in the southern US oil field, the largest in the country, that could be worth as much as $10 billion, Reuters reported, citing sources familiar with the matter. Shell declined to comment to Reuters.

Shell produces some 160,000 to 170,000 barrels of oil per day in the Permian Basin, upstream director Wael Sawan said on May 25 during a meeting with analysts. Sawan has said that over the last year, the company has lowered its Permian production by some 20,000 barrels a day in an effort to preserve cash.

Shareholders and activists have intensified calls on oil companies like Shell, Exxon Mobil, and Chevron to reduce their carbon emissions in recent years. They have grown louder, and more successful, this year.

Investors’ efforts to push for change reached a landmark moment this spring when Exxon shareholders elected to install three new directors on the oil giant’s board in a bid to accelerate its shift toward cleaner energies.

Environmental- and social-related shareholder proposals have seen record support this year, according to a report last week by RBC Capital Markets analysts Sara Mahaffy and Lori Calvasina. Just shy of one-quarter of such proposals at US companies have received majority support, up from just 5% in 2019.

Shell earlier this year outlined a plan that included targets like cutting the carbon intensity of the energy products it sells by at least 6% by 2023 and 20% by 2030, compared to 2016 levels.

But its targets were challenged last month when a Dutch court ordered Shell to cut its carbon emissions by an accelerated net 45% by 2030 from 2019 levels. The company called that ruling “disappointing,” and said it will focus on its efforts to reduce its carbon footprint.

Shell, led by Chief Executive Chief Executive Ben van Beurden, has also said it believes its annual oil production peaked in 2019 and will likely fall by 1% to 2% a year until 2030.

“The Permian indeed is part of that core position simply because we do see the running room in there, and we do actually believe it is a high-quality position, plus a high-quality operation that we have there,” Van Beurden told an analyst during a call in February, referring to the company’s strategy in the oil field. “And therefore, we will continue to invest in it until, indeed, it doesn’t make sense anymore.”

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The deal whisperer: Inside the rise of Raine Group’s Jeff Sine

Masayoshi Son, Rupert Murdoch, Jeff Stine, and Ari Emanuel with a WeWork office building on fire and The Raine Group logo patterned on a green background.
From left: Masayoshi Son, Rupert Murdoch, Jeff Sine, and Ari Emanuel.

  • Jeff Sine has built a career as an unorthodox banker.
  • He’s advised business moguls like Masayoshi Son and Rupert Murdoch.
  • The Raine Group, a media- and entertainment-focused merchant bank, is now a billion-dollar business.
  • See more stories on Insider’s business page.

From humble beginnings, Jeff Sine built a career as an unorthodox banker who offered unvarnished advice and tamed unruly transactions for business moguls like Masayoshi Son and Rupert Murdoch. He defied the odds and built merchant bank The Raine Group into an investing empire in its own right.

Insider spoke with 10 people who have worked with Sine throughout his career, including senior bankers and clients. They explained how Sine became one of the world’s most influential dealmakers, the origins of his relationships with Masa and other key clients, and how he built a billion-dollar business.

SUBSCRIBE NOW TO READ THE FULL STORY: How Jeff Sine became SoftBank CEO Masayoshi Son’s deal whisperer and built Raine Group into an investing empire along the way

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Billionaire investor Bill Ackman told a story about his song-writing grandfather that won over Universal Music’s bosses

bill ackman
Bill Ackman.

  • Bill Ackman’s SPAC is close to buying 10% of Universal Music Group for $4 billion.
  • Ackman told a story about his grandfather, a songwriter, to win over UMG’s bosses.
  • UMG executives gifted Ackman two records and the sheet music for his grandfather’s hit song.
  • See more stories on Insider’s business page.

Bill Ackman’s special-purpose acquisition company (SPAC) is close to buying 10% of Universal Music Group for $4 billion. The billionaire investor might have his grandfather’s musical talents to thank if he manages to seal the deal.

The Pershing Square chief began his first meeting with UMG executives by regaling them with a story about Herman Ackman, The Wall Street Journal reported, citing people involved in the transaction.

Ackman’s grandfather wrote a song called “Put Your Arms Where They Belong (For They Belong to Me)” in 1926, which he sold to music-publishing group Tin Pan Alley for $150. The ditty sold more than 750,000 copies, Ackman told the bosses of the world’s biggest music company, according to The Journal.

The UMG executives later discovered that their company owned the elder Ackman’s recording. They dug up two records of the song and the accompanying sheet music, mounted and framed them, and gifted them to Ackman, The Journal reported.

Read more: A 29-year-old crypto billionaire shares how investors can use Tesla or Apple stock as collateral to buy bitcoin or ether

Vivendi, UMG’s parent company, met with multiple private-equity firms and other investors interested in buying a piece of the division. Ackman’s clear passion for the music business – rooted in his grandfather’s legacy – along with his relationship with management and his vision for growing the company, helped him stand out from the crowd, The Journal said.

Ackman’s SPAC, Pershing Square Tontine Holdings, is the vehicle looking to acquire the UMG stake. PSTH, which joined the stock market last summer, would remain a public company and could have nearly $3 billion to pursue another deal, even if the UMG transaction is successful.

Pershing Square also hopes to launch a new take on SPACs called a SPARC, which won’t lock up investors’ capital while it searches for a deal, and won’t have the pressure to close a deal within two years. Ackman’s proposed SPARC would be armed with up to $11 billion to pursue a business combination.

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