Will Hambrick Head Berkshire Hathaway?
Mar01

Will Hambrick Head Berkshire Hathaway?

Warren Buffett’s annual letter to Berkshire Hathaway shareholders is out this week. Normally, the annual letter of one of the most widely read documents in the business world. This year, given that Warren Buffett has been in the news so much recently with the Buffett Rule and all, it is probably being perused more closely than usual. There is something for the chemical industry in the letter: On September 16th we acquired Lubrizol, a worldwide producer of additives and other specialty chemicals. The company has had an outstanding record since James Hambrick became CEO in 2004, with pre-tax profits increasing from $147 million to $1,085 million. Lubrizol will have many opportunities for “bolt-on” acquisitions in the specialty chemical field. Indeed, we’ve already agreed to three, costing $493 million. James is a disciplined buyer and a superb operator. Charlie and I are eager to expand his managerial domain. I wrote up a small story in C&EN based on this passage. The idea being that Lubrizol is on the hunt for more small acquisitions. My boss, assistant managing editor Mike McCoy, had an even more interesting interpretation of the line “eager to expand his managerial domain.” Mike suggested that maybe “managerial domain” would extend to the whole of Berkshire Hathaway. In other words, perhaps Buffett has Hambrick in mind as a successor. I snickered at first. It seems like a crazy idea because it would have Buffett giving the keys to the kingdom to someone who has only been with the company since September. And Hambrick would go, in relatively short order, from running a mid-sized specialty chemical maker to heading all of Berkshire-friggin’-Hathaway. BUT…Mike isn’t the only one to so speculate. This well-reasoned article by Harry Wallop in the Telegraph puts Hambrick as one of four possible candidates along with BNSF CEO Matthew Rose, reinsurance chief Ajit Jain, and Geico boss Tony Nicely. The “eager to expand his managerial domain” appears in paragraph following the revelation that he has come up with an unnamed successor and two backup candidates. Why was James Hambrick the next thought to come to mind? The phrase “eager to expand his managerial domain” is a cutesy way of hinting at a successor. Warren Buffett is fully capable of cute. Here he is playing the ukulele on television. Another line from the letter that I would like to overanalyze is this: “James is a disciplined buyer and a superb operator.” That is an enormous compliment coming from Warren Buffett. Picking stocks and buying companies is what Warren Buffett does. Go to any business section of any book store and you’ll oodles of books on Buffett’s methods....

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Lubrizol CEO Admits He Scared ‘The Bejeebers’ Out Of Analysts
Aug03

Lubrizol CEO Admits He Scared ‘The Bejeebers’ Out Of Analysts

And the award for outstanding achievement in the field of leveling with analysts goes to James L. Hambrick, CEO of Lubrizol. During his prepared remarks during Lubrizol's Q2 earnings conference call, he told analysts that he didn’t want to talk about his company’s bidding war with BASF to buy Cognis by, well, saying much more about the failed takeover attempt than any other CEO would spend talking about a failed takeover attempt: “I have nothing I can tell you in terms of portfolio enhancements. We're going to continue to work that space. Some of you may want to talk about the Cognis acquisition, I don't intend to spend any time on that this morning. We were not successful, it was a large deal, I know it scared the bejeebers out of some of you, but it's not very often that you could put together a bolt-on in personal care, in coatings, and in the industrial space. The only thing that was really wrong with it was it all came at us at one time and we weren't successful.” BASF inked a deal in late June buy Cognis for $3.8 billion. There were many leaks about the negotiation process before the deal was announced. Lubrizol supposedly had a bigger offer on the table, but the financing wasn’t as ironclad as BASF’s. As far as the scaring the “bejeebers” out of analysts goes, Lubrizol only has about $4.8 billion in revenues in 2009, making a $4 billion acquisition rather steep. Big acquisitions normally transform companies, but often into debtors-in-possession. However, Lubrizol did rack up $500 million in earnings from those revenues, not a bad record in a recessionary year. And let us not forget that when Lubrizol bought Noveon in 2004, it had about $2 billion in sales while Noveon had about $1.2 billion. Hambrick says Lubrizol isn’t out of the hunt: “We'll move on, we have other assets that we're looking at, other opportunities. I'm working at it full-time even as during the course of this week and will continue to work that. Our first priority is to invest in the business to sustain it and keep it moving. Our second priority really is what I would call the duet of portfolio enhancements and share repurchases. It's the proper use of our cash balance for the benefit of shareholders.” Odds are he won’t find a purchase that will push all of Lubrizol’s buttons like Cognis would...

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