Buffett Gave Shareholders Something to Ask Him About: A Big Deal

(Bloomberg) -- The bank of Warren Buffett is open for business again, just in time for his annual meeting with shareholders.

Thousands are expected to flock to Omaha, Nebraska, for Berkshire Hathaway Inc.'s annual meeting on Saturday, days after Buffett's company agreed to invest $10 billion in Occidental Petroleum Corp. in a deal that Bank of America Corp.'s Brian Moynihan helped facilitate. The transaction, which hinges on Occidental winning its fight to buy Anadarko Petroleum Corp., would give Berkshire preferred stock and warrants.

Buffett took a page from his own playbook in exacting a high price from a company in need of funds, as when Berkshire acquired multibillion-dollar stakes in Bank of America and Goldman Sachs Group Inc. Shareholders will probably want to hear more about Occidental on Saturday, and other ways Buffett might put Berkshire's huge cash pile to work. If history is a guide, they'll have plenty of other questions, too.

Tune in here for Bloomberg's Live Blog of the shareholders' meeting on Saturday

Buffett, who's chairman and chief executive officer, and Vice Chairman Charles Munger typically hold the floor for hours at the annual meeting, held in a cavernous arena now called the CHI Health Center. The topics can range from succession and dealmaking to the U.S. economy and global trade.

Berkshire's reservoir of cash has exceeded $100 billion since 2017 and is a focus for investors. The Oracle of Omaha, who built Berkshire with acquisitions and stock picking, has been stymied in his search for a big purchase as company values surged. In his letter to shareholders, the billionaire said that 2019 might be another year when Berkshire spends more on stocks while waiting for that "elephant-sized" acquisition.

Here's some other topics that might come up Saturday:

Amazon

In a twist for Berkshire, one of Buffett's investing deputies bought Amazon.com Inc. stock, putting some of Berkshire Hathaway's funds behind a company Buffett himself has long admired. While the investment wasn't made by the billionaire investor himself, Buffett told CNBC that he was an "idiot" for not buying shares in the past. The purchase is likely to spur questions about the influence of the investing deputies, Todd Combs and Ted Weschler, and Berkshire's changing views on technology investments.

Stock Buybacks

Berkshire loosened its share-repurchase policy last year, allowing the company to buy back $1.3 billion in stock. While Buffett prefers to spend on large deals or stock in other companies, the tweak opens the door to even more buybacks. Buffett has said that Berkshire could eventually become a significant repurchaser of its own stock, an implied seal of approval for his eventual successor to pursue the strategy.

Kraft Heinz

Berkshire felt the sting from its investment in Kraft Heinz Co. earlier this year when the packaged-food giant took a $15.4 billion writedown and named a new chief executive officer. Buffett, who helped create Kraft Heinz in 2015, has seen its value decline by about half since then. He acknowledged that he overpaid for Berkshire's 27 percent stake as once-dominant consumer brands were weakening, and said in February that he has no plans to sell or buy Kraft Heinz stock. His plan to stick with the investment could prompt shareholder inquiries about Kraft Heinz's troubles and its future.

Kraft Heinz “calls into question Berkshire's ability to successfully invest in aggressive corporate restructurings,” Keefe Bruyette & Woods analyst Meyer Shields said in an April note to clients.

Succession

Buffett turned 88 last year and Munger is 95. Even as they demonstrate their stamina by facing shareholders for hours, succession planning is a subject sure to arise.

Berkshire promoted Greg Abel and Ajit Jain last year to vice chairmen, giving Abel oversight of all the non-insurance operations and Jain responsibility for the insurers. Barclays Plc analysts said they believe uncertainty on succession has been “largely resolved” with the promotion, noting that Abel oversees a larger swath of the businesses and Jain is in charge of “industry-leading” operations.

To contact the reporter on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Dan Reichl, Steve Dickson

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