NEW YORK - Warren Buffett's search for deals in Brazil and China may put companies from Marcopolo SA to Odontoprev SA and Lonking Holdings Ltd on his wish list.
The 80-year-old billionaire investor and chairman of Omaha, Nebraska-based Berkshire Hathaway Inc said at a news conference on May 1 after its shareholder meeting that Brazilian companies are on his "radar screen" and that he would be "delighted to buy businesses in China." Buffett's comments came less than two months after agreeing to purchase Wickliffe, Ohio-based Lubrizol Corp for about $9 billion.
The world's most successful investor is looking outside the United States with emerging economies forecast to grow twice as fast as developed nations and near-zero percent interest rates limiting returns in fixed-income markets. Marcopolo, Brazil's biggest busmaker, Odontoprev, the country's largest provider of dental plans, and Lonking, one of China's biggest makers of construction equipment, are among 27 companies from Brazil and China that meet the acquisition criteria listed in Buffett's annual report, according to data compiled by Bloomberg.
"One of the reasons he's been traveling the globe is to try to find something that makes sense, that he can understand in growing economies," said Barry James, who oversees $2.5 billion as president of James Investment Research Inc in Xenia, Ohio. "It'll probably be in the next year or two that he'll be doing some of these international deals."
Buffett didn't return a request for comment e-mailed to his assistant, Carrie Kizer.
A takeover of a publicly traded company in either Brazil or China would be a first for Berkshire, which has struck at least $50 billion of acquisitions in the US in the past decade for public companies, according to data compiled by Bloomberg.
Berkshire owns a stake in BYD Co, the Shenzhen, China-based automaker, through its MidAmerican Energy Holdings Co unit. Shares of BYD have more than tripled since Buffett agreed to buy 225 million shares of the company in September 2008.
Buffett typically prefers "simple" businesses with pretax profit exceeding $75 million, "consistent" earning power, and "good" returns on equity while employing little or no debt, according to his annual letter to shareholders on Feb 26.
As Berkshire has grown, Buffett has shifted his takeover strategy to focus on "capital intensive businesses", such as power producers and railroads, which require consistent investment in infrastructure and equipment.
Buffett, who agreed to buy Lubrizol in March, said at Berkshire's annual meeting that "we can't do a really big elephant now." Lubrizol was recommended to Buffett by David Sokol, former chairman of Berkshire's MidAmerican Energy unit.
Sokol, 54, who resigned on March 30, violated Berkshire's insider-trading rules and misled the company about his personal stake in Lubrizol, Berkshire's audit committee said last week.
Berkshire, which usually keeps at least $20 billion in cash on hand, had about $38 billion at the end of the first quarter, according to Buffett.
There are 27 companies from Brazil and China with market values from $1 billion to $15 billion that have capital expenses accounting for at least 5 percent of their net fixed assets; a return on equity exceeding 10 percent; profit growth in the past five years that ranked in the top 50 percent; and an average price-earnings ratio in that span that was less than the average company in the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
So-called value investors such as Buffett also purchase companies when their stock prices are low by historical standards when compared with earnings.
"We don't go looking in specific countries. We are looking for ideas anyplace," Buffett said at the May 1 news conference. "Most of our opportunities will come in the United States. Whether it's three out of four or whatever it may be."
China's Lonking, which has had an average price-earnings ratio of 12.4 times over the past five years, increased net income more than sevenfold in the same span, data compiled by Bloomberg show. Analysts now project revenue at the Shanghai-based company will top $2.5 billion for the first time next year.
Overall, there have been 8,347 deals announced globally this year, totaling $827.3 billion, a 24 percent increase from the $669.3 billion in the same period in 2010, according to data compiled by Bloomberg.
Bloomberg News
