Buffett and Mars

Thu, 02/24/2011 - 18:58

 In answer to one of your questions, would Buffett buy Mars? The answer is, yes, in his dreams. He partnered with this family-owned company to fund its acquisition of Wrigley's. Buffett would love to buy Mars... at the right price. It is (generally speaking) run on Buffett-like principles. It owns several of Buffett's most admired brands, including Snickers, which he has cited as the chocolate bar that is immune to competition, and M&Ms. Drawback: the pet food business of Mars is fundamentally a lot less attractive than the confectionary and has been plagued by recalls and consumer issues.  Another problem -- it's unlikely that the Mars family would sell, much less sell at a price that wouldn't cause Buffett severe heartburn. This is a one-of-a-kind business and the family knows it. It would be interesting to know what kind of valuation this business would trade at vs Nestle if it were publicly traded. Meanwhile, here's an oldie-but-goodie New York Times article, The Emperors of Chocolate, Inside the Secret World of Mars.

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Sun, 02/27/2011 - 22:07 — Anonymous

yes, but...

The reason I put forth IKEA is due to succession planning and such. Seeing as you know Ingvar so well, you realize his age puts him closer to death than your average businessman. It might not be Ingvar selling and Buffett buying, but IKEA and Berkshire are a solid match whether its next year or in 10 years. The criteria fit. The reputation of Berkshire is such that Ingvar's baby would not be perverted by a bunch of dealmakers and PE guys exploited the process of executing an estate. Berkshire has the capital to execute a transaction as well.

Sun, 02/27/2011 - 04:14 — Anonymous

IKEA II I know Ingvar

IKEA II

I know Ingvar Kamprad, the chance of him selling IKEA is the exact chance of WEB selling his stake in BRK to Kamprad. That is nil.

IKEA is his masterpiece, it would be like him selling his baby.

What I can't wrap my head around is how people like the Sees or Wertheimer can be tricked into selling their extraordinary businesses? Why not just keep them? If you don't want to run them yourself, why not put an able person there? You could be your own mini Buffett letting others run the business for you and getting a nice dividend in infinity.

Moreover, think about it, having $1M or $1B on your bank account, does it really matter? You can't eat better, you can't live better, really. Wanting those $1B just makes one suspect that you are as utterly unbalanced and insane as a Mubarak or a Gaddafi.

Sat, 02/26/2011 - 15:37 — Anonymous

IKEA

To be honest, I don't think IKEA will be sold to an outside interest anytime soon. Buffett has approached Kamprad in the past and been turned down, and I don't see a reason any material changes. All indicators points toward it continuing as a family owned business. Also, the business may be too big even for Berkshire to swallow (at least without major share dilution). You could make a pretty good case that if IKEA was a public company, Kamprad's shares would make him the richest man in the world, by applying a pretty modest multiple for a super-robust business (with $3.6b in earnings 2010 the p/e would only have to pe 15 to make him top of the list ahead of Carlos Slim).

Thu, 02/24/2011 - 20:32 — Anonymous

I always found it funny how

I always found it funny how pre-Mars/Wrigley, Buffett would always always always talk about how he wanted a business he could understand, like chewing gum. He always used chewing gum as an example of a business immune to change. Unless I missed it, no Buffett watchers ever mentioned Wrigley.

I could just be full of myself, but I've always had a feeling Buffett would buy Ikea from both a business perspective and the ownership structure of the company. The owner is a frugal guy and Ikea is a low cost operator in the furniture industry that has a strong franchise. He also is a fan of furniture retailers judging from NFM. I remember reading something on Bloomberg that the ownership structure was quite convoluted to avoid taxes, so I don't know how much a deal killer this might be, but the owner is approaching an age where he would be looking to sell.

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