All the headlines were stolen by Warren Buffett when he committed in a deal worth $12.1 billion. The deal was to take over the ketchup maker HJ Heinz Co.in 2012. Almost the similar amount was spent by the managers of Warren Buffett’s Berkshire Hathaway in 2012, however that attracted pretty little attention compared to this takeover deal.
On last week, several executives of Berkshire met in Omaha, Nebraska for the annual meeting of the company. In recent interviews, they stated that they are planning to spend more this year than what they did in 2012. Berkshire has plans of upgrading a rail network and apart from that; they are also going to upgrade the energy utilities. They plan to expand manufacturing capacity and hunt for further acquisitions as well.
Buffett, currently at an age of 82, largely depends on the chief executive officers of the various operating units to start new deals and invest in plant and equipment for building the businesses, with an attempt to widen the overall competitive advantage. This helps to slow down the accumulation of cash and also reduces the need of Buffett to discover others uses for the cash.
According to the CEO of Lubrizol, a renowned chemical maker, James Hambrick, if he does not take any of the own cash flow and reinvest further, he is adding to the problems of Buffett. Incidentally, Berkshire took over Lubrizol 2 years ago.
Lubrizol is going to spend around $1.4 billion in the next 3 years as it is going to replace all the equipment and add capacity to manufacturing of various products such as chlorinated polyvinyl chloride, which is a plastic used for pipes in buildings. Even through this unit has spent in various areas and made many acquisitions, still cash was left to be sent to Buffett in Omaha, as mentioned by Hambrick.
According to the President of Henry H. Armstrong Associates, a renowned Investment Management company, James Armstrong, shareholders of Berkshire should be happy as Buffett and his deputies have the record of using the funds pretty wisely. Armstrong added that not much of that big amount will be wasted.
In a letter sent to the shareholders, Buffett praised the attempts of his deputies to spend the money. He added that as opportunities abound in the entire US, a new record can be set in 2013 for capital expenditures.