The catalogs first started coming into my house a few days ago, featuring kitschy Santa Claus costumes and exploding New Year's Eve party favors. The name of this mail-order supplier of merry pranksters was Oriental Trading, which I discovered is a purveyor of toys, games, party provisions and craft supplies.
Coincidentally, it is also the latest addition to the Berkshire Hathaway (NYSE:BRK.A) family of companies.
A big year for acquisitions
Though I had never heard of Oriental Trading, Mr. Buffett surely did, as the company was founded, and is still based, in Omaha. The company was nursed through bankruptcy by investor groups, the largest of which is asset management firm KKR & Co. (NYSE:KKR), and it notched EBITDA of approximately $70 million last year. When KKR and its fellow owners decided to shop the company around recently, Buffett made his own deal for $500 million after no takers surfaced at an auction. For KKR, the sale could double its original investment in the company.
Berkshire was in acquisition mode this year, and the Oriental Trading purchase expands the company's retail segment. But, retail wasn't the main focus of Berkshire's activity. Buffett's company has spent far more money on acquisitions that have to do with one of his favorite subjects -- housing. Last month, Berkshire submitted the winning bid for Residential Capital's mortgage loan portfolio, forking over $1.5 billion for the lot. ResCap, Ally Financial's bankrupt mortgage department, also auctioned off its cadre of loan servicing rights to Ocwen Financial (NYSE:OCN).
This was quite a coup for Berkshire and Ocwen, since NationStar Mortgage Holdings (NYSE: NSM) was the original favorite to grab both portfolios, having the blessing of ResCap, Fannie Mae and Freddie Mac. But Berkshire, a big-time investor in ResCap, decided to throw its hat in the ring. The rest, as they say, is history.
In another housing bet, Berkshire has very recently formed an alliance with Brookfield Asset Management (NYSE:BAM), a firm that concentrates on property, power and infrastructure. The joint venture will see Berkshire's HomeServices of America arm managing residential properties in the U.S. The service will join existing ones with Prudential Real Estate and Real Living Real Estate, and offers housing-related services through its affiliates. The new partnership will extend Berkshire's reach to Northern California, New York, and eastern Massachusetts.
Buffett is one of the most successful investors in the world, and there is no doubt in my mind that these new ventures and acquisitions will add to his company's bottom line. With a purchase price of just over seven times EBITDA, I would say this Berkshire's pickup was a nifty bargain.
No doubt, his housing-related investments will also bear fruit -- and soon, according to shiny new numbers coming from that sector. Investors everywhere, take note.