Archives for posts with tag: Berkshire Hathaway

Warren Buffett began buying USG Corporation stock in 2000 right before its second bankruptcy, not great timing. But USG seemed to fit his investment profile: an industry leader in a basic industry-building materials.

Warren and Berkshire Hathaway stayed in during USG’s bankruptcy, loaned the Company money at 10% and then converted it into more stock. Today, Buffett is USG’s largest shareholder with just over 30% of its common stock. For most of the last twenty years, this was good for USG. A friendly stockholder of that size makes any company almost bullet-proof to any unfriendly takeover attempt. And Warren Buffett is usually a very friendly shareholder; until he isn’t.

Recently, a private German building material firm named Knauf made a hostile take-over bid for USG. Knauf has owned about 10% of USG also for the last twenty years. Normally a take-over bid by someone owning only 10% would not be a sure thing, but there was a unique wrinkle in this offer. Warren Buffett joined the proposal by offering Knauf an option to use his shares in getting the deal done. So now USG faces a take-over bid backed by 40% of its shares. And four other funds like Vanguard own, in total, another 20% of the shares. So, it is very likely that USG Corporation will be acquired. It may just be a matter of time and final price.

Since I left USG Corporation before Warren Buffett bought his first shares in 2000, one could ask what does this have to do with me? On many levels, nothing. Most of the people I worked with there are retired or dead. I was USG’s CFO during their first restructuring not the second one that Mr. Buffett waited patiently to end. But even though I was only at USG a dozen years, the experience and the people meant something to me. We fought to save USG in its first major financial restructuring. It took a toll on me, but it also left a mark and feelings of respect and admiration for the place. USG is a very proud and independent company with a lot of history and a unique culture.

So, this event got me thinking!

All the firms I worked for in my business career may be gone. Arthur Andersen by government decree; Donn Corporation sold to USG; IMC Global which merged with part of Cargill to become Mosaic; and now the 100 year USG Corporation. I outlasted them all.

In the generations before me, people worked their whole life for one firm and then retired there. Some of my wife’s grandparents did that in the tire industry in Akron, Ohio. And at least one of those firms, Goodyear, is still around!

But for the millennials of today, my experience probably seems quaint. Only four companies over an entire work career? Nowadays young people will have a dozen or more employers and no reason to wonder what happened to their previous ones. We change jobs as often as we change our cell phones.

So, best of luck and success to the people and culture of old USG Corporation whatever happens to it!

And Warren Buffett showed up twice: early in my working career and after I retired.

 

Whenever a blogger references really important people or companies, the number of hits on their website goes up. I have found this occurs when I mention my wife’s favorite company, Apple, or the infamous, to me, Tesla. But I actually have had two connections to the famous and well-regarded, Warren Buffett. Let’s start with a story I will call:

Leaving Donn Corporation for Warren Buffet!

I believe that everything in life and business is a cycle. There is a beginning, middle and an end that occur over some variable but predictable timeframe. Daniel Levinson’s book, Seasons of a Man’s Life, talks about this in detail and gives creditability to the notion of a seven-to-ten-year cycle or itch both in one’s personal and professional life.

For me, it was about twelve years after I started with the private Donn Corporation that I almost left. At the time, my old boss had retired and I was the Chief Financial Officer.

The Donn companies had grown ten times in that time period. We had gone through several financial and organization crises. I had finally been able to build a small but great corporate headquarters staff that was working well with both the owner’s family and Donn’s unique business people. The large Donn domestic business had an excellent Controller who was gladly taking on some my work.

I was bored to death! I had never experienced that feeling in public accounting or at Donn. And, I was about 38 years old, prime for what Daniel Levinson would call the Age 40 Transition. He wrote that, at all of these critical times in our life, we all consciously or subconsciously reflect and re-evaluate both our personal and work lives. Sometimes we make big changes and sometimes we don’t.

At exactly that moment I received a call from an executive search firm. As CFO of a very private mid-sized firm I did not get a lot of these calls, but when I had in the past, I would say thanks but no thanks. This time I actually listened. This time I even agreed to meet the headhunter for lunch. And what I heard was fascinating:

-a much larger, well known public firm was the client

-they wanted someone with my diverse background

-they were growing worldwide through acquisitions

-the CFO role involved a large pay package with stock options (not available at private Donn)

And here was the strangest thing. They were located literally down the street from Donn! It seemed too good to be true. But it also seemed like the perfect next step for me. The bigger size and the public company status were both appealing.  I love doing deals and the stock was a way to build-up my own net worth. I even really liked the search person. So, I agreed to interview. We were closing in on an offer when the headhunter called to say the search has been put on hold. Hmm. Okay.

A few months later he called and told me that his client has just been acquired by Warren Buffett’s Berkshire Hathaway, and it will become one of their portfolio companies. But they still want a CFO.

I said no thanks. The CFO role in a subsidiary of a private company is not the same as a public firm. This is true even if the owner of the private firm is Warren Buffett.  By then, Donn seemed more fun. And, unbeknownst to me, within a short time I would be involved in the sale of the company to USG Corporation. I never regretted my decision to stay with Donn even though I missed the opportunity to work with a legend.

There is a valuable lesson here that I often explain to people I advise. Sometimes, in your personal and business life, you need to take a long, hard look at where you are and explore your alternatives.  You may decide to make a move or you may decide you are better off staying where you are. But the internal review process is critical whether you are in your Age 40 Transition or not!

Next time, I will tell you about my second connection to Mr. Buffett.