Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has agreed to acquire Oriental Trading, the largest direct retailer of toys and cut-price party supplies. Berkshire said in a statement that the acquisition will be completed by the end of this month, but the company didn’t disclose terms. People involved in the deal told the Wall Street Journal that Berkshire will be paying $500 million for Omaha-based Oriental Trading.
Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s chief executive, Warren Buffett, is searching for large size takeovers, meanwhile he is making smaller acquisitions that generate cash, the bread and butter of Berkshire. Buffett said that he has no intention to exit Oriental Trading in future. OTC has been given a permanent home with Berkshire Hathaway. Buffett recently acquired a building insulation maker, a food distributor, and several newspapers.
“We are delighted to have them join the Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) family and continue their quest to make the world more fun,” Buffett said
Oriental Trading had filed for bankruptcy in 2010 due to the economic slowdown and weak consumer confidence. Private equity firm KKR & Co. L.P. (NYSE:KKR) is the largest shareholder, with a one-third stake in Oriental Trading. KKR was the creditor to Oriental Trading in 2010, and the private equity firm exchanged its debts for equity when Oriental Trading emerged from Bankruptcy. The other major shareholders in the company are Par IV Capital Management and Crescent Capital.
Oriental Trading sells more than 40,000 catalog items, including crafts, teacher supplies, decorations for holidays, wedding favors, novelties, and stickers. In the last 12 months, the company earned $70 million in profits EBIDTA by selling items through direct mail and Internet.
Oriental Trading shareholders have been exploring a sale since the beginning of 2012. They hired Lazard Ltd. to run the process. When an auction failed to attract a buyer, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) chimed in. Warren Buffett’s offer values Oriental Trading at about seven times its profits. At this rate, KKR & Co. L.P. (NYSE:KKR) would get double of what it had loaned Oriental Trading to emerge out of bankruptcy.