Warren Buffett's holding company, Berkshire Hathaway (BRK.A -0.18%) (BRK.B -0.21%), famously bought See's Candies several decades ago. Buffett has called the maker of boxed chocolates his "dream business." In this episode of "The Rank" on Motley Fool Live, recorded on Feb. 28, Fool.com contributors Jason Hall, John Bromels, and Travis Hoium discuss why See's has been one of Berkshire's sweetest acquisitions over the years.
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Travis Hoium: See's Candies, bought in ... I don't have the year in front of me, the '80s?
Jason Hall: Maybe before that. It's been a very long time.
Hoium: Maybe the '70s?
John Bromels: I'm not sure. He was eating it when I started investing, so as far as I know, it's synonymous.
Hoium: That's always the candy that they have.
Hall: Oh, yeah, it's at the annual meeting every year.
Bromels: It's the peanut brittle, that's what he eats.
Hoium: Bought the company for $25 million, which was a little bit less than sales actually at the time. We don't know exactly what the valuation of the company would be, but it does about $430 million in sales, and has distributed multiples, many multiples of what Buffett paid for it back to Berkshire to be reinvested elsewhere.
Hall: Because one of the things you've talked about with that business, Travis, I think so interesting is, they basically use the same machines to make the candy today that they did when Berkshire bought the business. In terms of the cash-on-cash conversion, it probably generates double in cash flow or more every year what Buffett paid to buy the business to begin with, maybe more than that; it could be significantly more than that.
Hoium: Finding businesses where you can have those depreciated assets and just keep them running forever. The first plant that I ever worked in was you'd have equipment that was 40 years old, still making rolls of tape.[laughs] Good business to be in.
