Southwest Airlines Jumps After Unconfirmed Talk of a Buffett Takeover

(Bloomberg) -- Southwest Airlines Co. abruptly jumped the most in a month amid speculation on social media that Warren Buffett's Berkshire Hathaway Inc. was considering a takeover bid. The carrier declined to comment.

The deal talk linking Berkshire and Southwest appeared on Twitter with a mention by StockTradersNET, which called the speculation “unconfirmed.” Berkshire, which bought stakes in the four largest U.S. airlines in 2016, is the second-biggest shareholder in Southwest, with a 9.9 percent holding.

“There has been speculation circulating that Warren Buffett might be looking to acquire an airline for some time and that Southwest might be a good fit,” the company said in a statement Thursday. “As a policy, we do not comment on speculation, but appreciate Berkshire's continued support of Southwest Airlines.”

Southwest rose 3.6 percent to $55.78 at 12:36 p.m. in New York, after climbing as much as 5.8 percent for the biggest intraday gain since Jan. 24.

Berkshire didn't respond to a message left with Buffett's assistant.

Andrew Davis, an analyst at T. Rowe Price, which holds Southwest shares, gave little credence to the deal speculation. But an eventual airline acquisition by Berkshire can't be ruled out, he said, even though Buffett last year said he preferred to limit his stakes in Southwest, American Airlines Group Inc., Delta Air Lines Inc. and United Continental Holdings Inc. to 10 percent or less.

“I don't think it's crazy to think Berkshire could buy one of those four airlines one day,” Davis said. “But the way this was released seems like someone was floating a rumor to support their portfolio on the last trading day of the month.”

Buffett's Bets

Buffett has bet significantly on long-term U.S. economic growth by investing in transportation, and his company owns BNSF Railway Co., logistics provider McLane Co. and a network of car dealerships. Berkshire's holdings also include the NetJets luxury-plane unit and Precision Castparts, a maker of aerospace components.

Berkshire has $112 billion in cash and could use a majority of it for an acquisition.

“If you look at the things he's done in the past, they tend to be domestic-oriented, relatively higher-return companies compared to peers, and tend to generate good free cash flow,” said Darryl Genovesi of Vertical Research Partners. “Southwest seems to check all those bases.”

--With assistance from Katherine Chiglinsky.

To contact the reporter on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson

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