Dawn Pennington

Buffett's 'Sweet' Deal

    Tweet This

With the number of creditors who are willing to sign on the dotted line after some of their best customers have been forced to write off massive amounts of debt just to stay afloat being pretty low, one wonders whether the April 28 buyout of William Wrigley Jr. Co. (WWY) by Mars Inc. and Warren Buffett's Berkshire Hathaway (BRK) would be such big news in better market and economic conditions.

Anytime Warren Buffett steps into a deal, though, investors sit up straight and pay rapt attention. So, of course his involvement in engineering some creative financing to help M&M maker Mars acquire the world's biggest chewing gum manufacturer (in a $23 billion deal) isn't exactly going to go unnoticed on Wall Street. Because, let's face it -- if you want to follow in the footsteps of the cash-flush, "smart money" investors, Mr. Buffett is the one you want to emulate!

Wrigley shareholders, who saw their stock close at $62.45 on April 25 (on trading volume of just more than 1 million shares), saw the stock trade in the $77 range with volume well-above 28 million on April 28. Per the deal, WWY shareholders received $80 in cash for each share. Talk about a chewing-gum company that's bursting with flavor for its investors!

'SO EASY, A CAVEMAN CAN DO IT'

You may recognize that phrase from Geico commercials. What you may not know is that Geico is one of Berkshire Hathaway's three subsidiaries, two of which focus on property and casualty insurance. (The other offers fine jewelry.)

Thus, in a field fraught with risk (i.e., investing), this is a man who knows how to reduce or even avoid big exposure to it. The man isn't called the "Oracle of Omaha" for nothing!

According to Investopedia, Buffett invested $10,000 in 1965 into Berkshire Hathaway and it was worth $30 million, 30 years later. For the rest of us who are hoping to gain even a fraction of his Midas touch when it comes to picking the "right" names, we don't need to sit on the sidelines because we don't have his millions or billions to invest.

So, keep in mind that he isn't investing out of the kindness of his heart -- he's not trying to "save" companies that are floundering. He's picking strong names and using his influence (and capital) to make them stronger. He declares on Berkshire Hathaway's Web site that "You probably know that I don't make stock recommendations." But he doesn't have to -- his investments speak for themselves.