Berkshire Hathaway (BRK.A)(BRK.B) CEO Warren Buffett spoke with FOX Business Network’s (FBN) Liz Claman about the announcement that Berkshire is teaming up with 3G Capital to purchase Heinz. Buffett discussed the deal, saying, “The one thing I can assure you is that we will own our interest and maybe even a larger interest over time in Heinz and my guess is that [3G Founder] Jorge Paulo, I am almost sure will be our partner forever on that.” Buffett continued saying, “It is not a private equity deal. This is an operational business deal… We are putting some money in it, but we’re not going to take some money out.” Buffett also discussed his thoughts on the economy and the housing market, saying “the housing market is getting better,” and that “Construction coming back is a very important force in the economy.” He also talked about his $5 billion investment in Bank of America and said, “We originally got 10-year warrants and I would expect that we would exercise those very close to the 10-year period.”
Excerpts from the interview are below.
On why he decided to partner with 3G Capital on the Heinz (HNZ) deal:
“Well 3G actually was named after three fellas that, all of whom I know, led by Jorge Paulo Lemann and he’s not really a private equity guy. He operates and runs and will own businesses to his death....The one thing I can assure you is that we will own our interest and maybe even a larger interest over time in Heinz and my guess is that Jorge Paulo, I am almost sure will be our partner forever on that. This is not a private equity deal. It has certain things that make it look like it, but it is not a private equity deal. This is an operational business deal.”
On whether there could be a bidding war for Heinz:
“There won't be any bidding war on this one.”
On whether there has been any discussion with 3G Capital about shining up Heinz and then flipping it back to being publicly traded:
“There is no way I would. We are putting some money in it, but we’re not going to take some money out.”
On how 3G picked the price for Heinz:
“They did most of the work in deciding what to pay and I went along with it. I was reluctant but I signed up.”
On how he feels about the Heinz deal:
“Well my guess is that the arbitrary jurors, they’re the ones that set the price because I would guess that 90 percent of the volume at least on the buy side would be going into arbitrage hands and they calculate the probabilities of the deal going through, they calculate the carry in terms of dividends, they count the cost of money and when they get all through with it they’re shooting for fairly small returns, but interest rates are so low these days that that’s the nature of the arbitrage business and they probably rate this basically as virtually 100 percent likely to go through and that always enters into the calculation of what they will pay.”
On the housing market:
“The housing market is getting better, both in terms of new construction and in terms of resale of existing homes. We’re actually also the second largest real estate brokerage firm in the United States so I get the figures every month on every one of our brokerage units from 25 or so different cities and I get median prices, shale spending, all kinds of things and all the signs are pointing upwards in the home field…. With housing, people say construction workers are only 4 percent of the labor force, but it extends way beyond that, whether it’s in paint or brick or carpet, those are not construction workers, our activity in those fields feeds off construction so I think construction coming back is a very important force in the economy.”
On Treasury Secretary Nominee Jack Lew:
“Tim [Geithner] has been a terrific Treasury Secretary. The country owes him a lot. I do not know Jack Lew. I have never met him, never talked to him. Ken Chenault incidentally would have been a great Treasury Secretary but I am very glad he stayed at American Express. I love him.”
On whether he plans to stay invested in Bank of America:
“We will be around -- in all likelihood, I can’t guarantee this-- but we originally got 10 year warrants and I would expect that we would exercise those very close to the 10-year period. I like the long term prospects. There’s no reason to exercise them until just probably shortly before expiration….if I felt comfortable then, I feel even more comfortable now.”
On how Geico is doing in light of the cars destroyed by Hurricane Sandy:
“We are number one in auto insurance in the metropolitan New York market so of the cars that were destroyed, we were the leader. It’s ok, we love being number one in the metropolitan New York area, there was a day or two there when we may not have felt so good about it but we love being number one in New York. We got our share.”
On whether he frequently calls companies that he has a stake in:
“No. I probably phoned [Bank of America CEO] Brian Moynihan, I mean at the time we made the deal there were a couple calls and then probably a couple of calls since then. They invited me to come to Charlotte a few weeks ago and that was the first time I ever talked to a group of them.”
On Time Inc.’s magazines being for sale and whether he wants to buy People Magazine:
“I read our newspapers and I don’t read People.”
On how Shaw Industries is doing:
“Whether it’s Shaw or in the brick business, it’s getting better. It’s getting better from a low base, we’re not remotely back to where it was in 2005 or 2006, that period but it is getting better every month. I can tell you in terms of brick shipments, average prices, you name it, the business is getting better.”
On how his railroad business is looking:
“Well last week we carried 195,000 – they call it units, I still call them cargo loads – it was 195,000 and that was up a fair percentage over the year before. There again the gains keep coming, we’re not back to the peak by a long shot but they keep coming and they have been coming pretty consistently since late summer of 2009 so we’ve had a rather consistent but not robust recovery to this point and I think it will continue.”
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