Last week, we learned that Berkshire Hathaway (BRK.A -1.25%) (BRK.B -1.35%) recently bought $400 million worth of Kinder Morgan (KMI -0.72%)
In this video segment, Motley Fool analysts Sean O'Reilly, Tyler Crowe, and Taylor Muckerman go over the numbers and what they mean about the buyout, and also how the deal bodes for Kinder Morgan's future.
A transcript follows the video.
This podcast was recorded on Feb. 18, 2016.
Sean O'Reilly: And the big story of the week. Kind of. Sort of. I don't know. Warren Buffett steps up and buys Kinder Morgan. He bought, what, 26.5 million shares or something?
Tyler Crowe: Yeah, somewhere just shy of a $400 million stake.
O'Reilly: So, not big for him, but...
Crowe: No, no.
O'Reilly: It's nice to see.
Crowe: Yeah. Anytime a company gets the stamp of approval from Warren Buffett, it's normally a pretty good sign. When you're looking at a $300-400 million acquisition, it probably means that it might not have been Buffett himself, it may have been one of his...
O'Reilly: This has a Todd Combs feel to it, because it's only $400 million.
Crowe: Exactly. So, it may not actually be Buffett himself, but certainly within the...
O'Reilly: What's the name of that other lieutenants he has? Todd Combs and... ugh, anyways.
Crowe: Not ringing a bell right now. But, if you look at Kinder Morgan, you go from a company that, a few months ago, everyone was questioning, "Is this dividend sustainable?"
O'Reilly: Then it got cut, yeah.
Crowe: "They're going to run into some credit ratings," then they immediately cut, and now, I've got to assume that it wasn't just back in December when it happened, Berkshire Hathaway and the people there said, "Oh! Time to really start looking at these guys!" Then they pull the trigger on it within months. Actually, if you think about it, the purchase that they made on the 13F would have come in the fourth quarter. So, this was actually probably happening then. But I've got to imagine that the months and quarters and maybe even a year or so before that, this was something that was on the radar. I can't imagine that they made such a quick decision on that without really looking at the business long term.
O'Reilly: Got it. And actually...
Muckerman: Ted Weschler.
O'Reilly: There you go!
Taylor Muckerman: Todd Combs and Ted Weschler.
O'Reilly: There. And, actually, I think Ted, he lives here in Virginia in Charlottesville.
Muckerman: Yeah, I think you're right.