Speculation and media buzz mark Buffett tour

Warren Buffet says no Swiss deals are on the cards yet Keystone

The arrival in Europe of legendary investor Warren Buffett – the world's richest man - has caused excitement in business circles and among the media.

Visiting Switzerland on Tuesday, Nebraska-based Buffett spoke of long-term currency trends, the United States economy and his personal philosophy about gobbling up companies.

But when the conversation moved to the particulars – what, where and when to buy, and Europe specifically – Buffett played coy.

“I would be delighted to find the right kind of business in any country,” he told a gathering at the IMD business school in Lausanne. At the same time he moved to dampen expectations of any forthcoming transactions here.

“I can guarantee you we will not make a deal before the end of the week,” said Buffett, who in 2006 purchased an 80 per cent stake in the private Israeli metal cutting concern, Iscar, for $4 billion (SFr4.15 billion) after receiving an email from the owner ten days earlier.

In January he gave Zurich-based Swiss Re, the world’s largest reinsurer, a shot in the arm when he traded an estimated $800 million for a three per cent overall stake in the company.

Martin Naville, head of the Swiss-American Chamber of Commerce, said it wasn’t clear what had brought Buffett to Switzerland.

“That’s what everybody wants to know, but I’m not sure he knows. He always looks for things that are good but that nobody else notices yet. That’s the million-dollar question,” he told swissinfo.

Even so, Buffett himself indicated he was keen to expand his Omaha-based Berkshire Hathaway holding company and has been expressing a particular interest in family-owned firms. However, he says he won’t be knocking on any doors.

“We don’t buy when we’re ready to buy, but when owners [think it is] time to sell,” he said.

Buffett isn’t looking for just any old family-owned businesses. In Europe it is only firms with pre-tax profits of at least $75 million that are encouraged to apply.

But then again, Berkshire is sitting atop around $35 billion in spendable cash, ready to buttress the conglomerate’s portfolio of insurance, financial services, manufacturing and retail assets.

Confidence in Europe

Buffett’s common touch belies an astute commercial acumen that had steadily driven Berkshire’s Class A shares to over $150,000 on the New York Stock Exchange by late 2007. At present, a single share sits close to a more modest $125,000.

Buffett denied the four-day European trip represented a flight from a flagging US currency.

But he expressed confidence in the long-term prospects of European currencies. The euro has been trading above $1.55 against the dollar after standing at parity only six years ago. And the Swiss franc has risen almost 25 per cent against the dollar over the past five years, briefly eclipsing it earlier this year.

Switzerland’s political, social and economic stability make it an extremely attractive environment for investment, says Naville. “If he [Buffett] has the intention of taking a company to create some value out of it, it is a great platform.”

The US economy has consistently been rated as the most competitive in the world, including by an IMD study released just last week, but a surging Switzerland has improved to fourth place.

In any case, Buffett says he isn’t very particular where he invests, providing the conditions are right. Europe is presently a better place to invest than emerging markets, he argues.

“I’m perfectly happy to earn money in euros, whether it’s through US companies or whether it’s through companies domiciled here,” he said. Fears of divestment from the US economy were “not really a factor,” he added, noting that some 80 per cent of Berkshire’s revenues were generated abroad.

US criticism

“I think the US is following policies, and has been following policies, that will weaken its currency against other major currencies over a long period of time.”

Buffett, who is in the process of giving his entire fortune to charity, says he is a supporter of both Hillary Clinton and Barack Obama for the Democratic Party nomination. He is on a first name basis with both and refers to fellow billionaire Bill Gates as “Bill”.

A hero to legions of shareholders (many of which he has made very rich), Buffett says this trip is meant more as an introduction to the European business community than a “shopping spree”, as some media had speculated.

“Is this a trip to Switzerland or is it a little side step from a trip he was making anyway? That may be the right question to ask him,” said Naville.

Buffett’s next stops are Spain and Italy.

swissinfo, Justin Häne in Lausanne

Family Business Centre

Lausanne-based IMD, which hosted Warren Buffett on Tuesday, is one of the world’s leading graduate business schools.

The IMD Family Business Centre was founded in 2000 to provide management training for family-owned firms.

The Centre’s open and customised programmes focus on subjects including governance, generational transition and corporate culture.

Last year, around 80 students participated in open programmes.

The school does not disclose clients for customised programmes, but says it has consulted with approximately 800 firms of all sizes since its inception.

In 2008, the Financial Times ranked IMD’s executive education programme top in the world, tied with the Harvard Business School.

Berkshire Hathaway Inc

Berkshire Hathaway Inc is a Nebraska-based conglomerate holding company that manages a number of subsidiary companies.

In January, Berkshire purchased a 3% stake in Swiss Re, the world’s largest reinsurer, estimated to be worth $800 million.

Warren Buffett, estimated to be worth some $63 billion, bought Berkshire Hathaway in the 1960s and transformed it from a failing textile manufacturer into a holding company, directing its excess cash into buying shares in other enterprises.

Berkshire’s Class A shares are trading at well over $120,000 on the New York Stock Exchange.