Berkshire delves deeper into jewelry business
\nBuffett-owned Richline acquires Aurafin from private-equity firm
\nBy Alistair Barr, MarketWatch
\nLast Update: 2:56 PM ET Jul 5, 2007
\nMarketWatch<\/p>\n
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SAN FRANCISCO (MarketWatch) – Berkshire Hathaway Inc., the insurance-focused conglomerate run by Warren Buffett, expanded deeper into the jewelry business on Thursday after its Richline Group subsidiary acquired two gold jewelry manufacturers.<\/p>\n
Private-equity firm Norwest Equity Partners said it sold Aurafin LLC to Richline Group for an undisclosed amount. Richline also acquired Bel-Oro International to become what it said would be the largest supplier of gold jewelry to retailers.<\/p>\n
Berkshire is already a major player in the jewelry business, owning retailers Borsheim’s, Helzberg Diamonds and Ben Bridge. The purchase of Aurafin and Bel-Oro, which supply jewelry to thousands of retailers, adds another link in the chain for Berkshire.<\/p>\n
What’s unusual is that Berkshire bought Aurafin from a private-equity firm. Buffett and Berkshire Vice Chairman Charlie Munger have criticized the buyout business in recent years. The industry has raised record amounts of money and has been spending it on big acquisitions. That’s made it more difficult for Berkshire to buy large companies.
\nDuring Berkshire’s annual meeting last year, Buffett said that when he gets an offer to buy a business from a private-equity firm, he “puts the phone down faster than Charlie.”
\n“They invariably auction the business and are looking for strategic buyers,” Buffett said, adding that “a strategic buyer is just someone who pays too much.”<\/p>\n
Chicken feed
\nBuffett buys businesses from private-equity firms “very infrequently,” according to Berkshire investor Whitney Tilson.
\n“I can only recall one case: a tiny little business that makes chicken feed conveyor belts,” Tilson, head of money-management firm Tilson Capital Partners, said. “The name escapes me right now.”
\nBuffett’s penchant for bargains means he would probably only get involved with a buyout firm in special circumstances, such as a failed auction of a business, Tilson explained.<\/p>\n
Failed auctions are currently rare, so the acquisition of Aurafin likely happened because of other “unusual factors,” he added.
\n“If the marketplace was to change 180 degrees and private-equity firms became desperate to dump their holdings to raise cash and there were few other buyers, then — and only then — could I imagine Buffett becoming an active buyer,” Tilson said.<\/p>\n
Aurafin founder Michael Gusky sold half of the business to Norwest in 1999. It then grew into one of the largest suppliers of 10kt and 14kt gold and gemstone jewelry, counting all of the major U.S. retailers and more than 3,500 independent jewelry stores as customers.
\nGusky retired August 2006 but maintained a significant ownership position and a board seat.<\/p>\n
“Participating in the growth of Aurafin over the last decade and now ultimately seeing it find a home with Berkshire Hathaway has been a tremendous experience,” Gusky said in a statement.
\nAlistair Barr is a reporter for MarketWatch in San Francisco.<\/p>\n","protected":false},"excerpt":{"rendered":"
Berkshire delves deeper into jewelry business Buffett-owned Richline acquires Aurafin from private-equity firm By Alistair Barr, MarketWatch Last Update: 2:56 PM ET Jul 5, 2007 MarketWatch SAN FRANCISCO (MarketWatch) – Berkshire Hathaway Inc., the insurance-focused conglomerate run by Warren Buffett, expanded deeper into the jewelry business on Thursday after its Richline Group subsidiary acquired two […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[411],"tags":[],"yoast_head":"\n