Buffett on the look out for big acquistions

By Richard Beales in Omaha

Updated: 3:40 p.m. ET May 7, 2006

Warren Buffett, chairman of Berkshire Hathaway, is on the lookout for big acquisitions, he said on Saturday, suggesting the company could spend upwards of $30bn over the next three years.

Mr Buffett told a crowd of 24,000 gathered in Omaha, Nebraska for the company's annual shareholders' meeting that he was working on one "low probability" acquisition worth as much as $15bn.

Some investors have expressed concern over whether Berkshire can deploy its $40bn-plus cash pile effectively, and Mr Buffett has in the past complained about a dearth of good deal opportunities.

The company announced a $4bn cash deal to buy 80 per cent of Iscar Metalworking Companies, the private Israel-based tools business, on Friday ­ Berkshire¹s first purchase outside the US. But Mr Buffett conceded that he needs to find more, and is looking inside and outside the US.

"We'd be happier, much happier, if we had $10bn of cash," he said, adding it was likely Berkshire would have "a lot less" cash in three years' time.

He said he expected more opportunities in the utility sector, where Berkshire owns 80 per cent of MidAmerican Energy, which recently completed the acquisition of PacifiCorp, agreed last year, for $5.1bn.

But he added that he did not intend to do "dumb deals" for the sake of reducing Berkshire's cash balance.

Overseas acquisitions like that of Iscar are also part of Berkshire¹s strategy to diversify away from dollar-based assets. "We like the idea of developing earnings power in other currencies," Mr Buffett said.

Mr Buffett said he still expected the dollar to weaken over time, but that his emphasis was shifting away from direct currency bets. The notional value of Berkshire¹s non-dollar currency contracts declined to $5.4bn on March 31 from $21.8bn a year before.

The legendary investor and Charlie Munger, his vice chairman, spent several hours in a packed sports arena addressing shareholders' questions on investing, US social security, management succession at Berkshire and a range of other topics.

Discussing commodities, Mr Buffett said he detected speculative participation in the recent run up in prices, particularly metals. He added that Berkshire had not benefited from the sharp rise in silver prices, despite at one time owning a lot of the metal.

"I bought it very early, I sold it very early. Other than that it was perfect," he joked.

Mr Buffett also tackled the question of succession at the company, one worry for shareholders and possibly part of the reason Berkshire¹s stock price, about $89,000 for a single class A share on Friday,­ has not moved much in two years.

Mr Buffett is 75, Mr Munger seven years older. The chairman said Berkshire¹s board had three potential successors in mind and knew which one they would choose immediately if necessary, but did not disclose who that was.

"Warren has kept the faith," said Mr Munger. "Do you really think he's going to blow it when it comes time to pass it on?"