Warren Buffett has been trying to find a way to spend his record cash pile of $128 billion on a self-proclaimed “elephant-sized acquisition,” but the multi-billionaire may have gone against his own successful philosophies while trying to close a much smaller deal.
“It shows how he is going further afield trying to deploy the large stash of cash he has on hand.”
Berkshire Hathaway, Buffett’s conglomerate, recently drafted a $5 billion offer to acquire Tech Data Corp., a company based out of Florida that distributes IT services and software for larger tech companies like Apple, Google and Microsoft. It is a publicly traded company, and the offer came out to $140 a share.
Everything was looking good for the deal until Apollo Global Management, a private equity firm, swooped in to offer $145 per share Friday. And it wasn’t the first offer Apollo had made (they started the bid at $130 per share, according to CNBC) revealing a business practice that Buffett rarely likes to participate in: a bidding war.
“Buffett rarely goes up against private equity companies and doesn’t like to get into bidding wars,” CNBC anchor Becky Quick said Friday. “But it shows how he is going further afield trying to deploy the large stash of cash he has on hand.”
After Apollo’s initial $130 per share bid, Bank of America informed one of Buffett’s lieutenants familiar with Tech Data’s business, and Berkshire had their $140-a-share counteroffer in place within hours.
Apollo raised it to $145, which would value the deal at $5.14 billion, not including debt. Apollo accepted the offer in the short bidding war, but it may not be over.
CNBC’s Mike Santoli believes Buffett could raise his bid, and has an advantage, because “certain companies (think) it’s a mark of honor to have Buffett want your company.”
But some don’t think Buffett is breaking the mold that made him and Berkshire so successful.
“It is clear the market believes this could be a bidding war still,” Starshot Capital B.V. founder Bram de Haas said. “I strongly disagree.”
“It is against Buffett’s long-time belief that you should never engage in a bidding war. I can’t see him throwing that practice out of the window, and certainly not for a $5 billion snack.”
We’ll just have to wait and see how hungry Buffett really is.