After Heinz buyout, Buffett is still looking for ‘elephants’

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Posted: Sunday, February 17, 2013 12:00 am

The $23 billion takeover of H.J. Heinz Co. isn’t enough to sate billionaire Warren Buffett.

Buffett’s Berkshire Hathaway Inc. has about $15 billion in cash left for deals — a figure that grows monthly — after committing $12.1 billion for Heinz. With Buffett saying Thursday his desire for “elephants,” or large acquisitions, remains unsatisfied, the world’s fourth-richest person could set his sights next on targets from Cheerios maker General Mills Inc. to hardware supplier W.W. Grainger Inc.

Buffett has built Berkshire into a holding company with $246 billion in market value through acquisitions of railroads, insurers, newspaper publishers, clothing companies and now ketchup.

According to data compiled by Bloomberg, 28 U.S. companies between $15 billion and $35 billion in market value meet the takeover criteria in Berkshire’s annual report. Two of them are General Mills, with iconic food brands from Yoplait yogurt to Pillsbury cookie dough, and Grainger, which sells power tools and office equipment.

Hershey Co., the maker of Kisses and Reese’s candies, also makes the cut.

“He certainly has the capital to do another deal,” said Matt McCormick, who helps oversee $7.5 billion as a money manager at Cincinnati-based Bahl & Gaynor Investment Counsel Inc. “He likes companies in this realm of name-brand products that have economic moats, consistent earnings, strong free cash flow and a reasonable valuation.”

Buffett told CNBC Thursday that Berkshire’s cash balance was about $47 billion at the end of 2012. He prefers to keep $20 billion in reserve, leaving about $15 billion following the Heinz transaction, which a filing Thursday shows is costing Berkshire $12.1 billion.

“I’m ready for another elephant,” he said. “If you see any walking by, just call me.”

General Mills would be a fitting takeover for Buffett after the Heinz purchase because both companies have recognizable brands and sell their products in many of the same stores, said Jeff Matthews, a Berkshire shareholder and Naples, Fla., based author of “Warren Buffett’s Successor: Who It Is and Why It Matters.”

“General Mills makes a lot of sense,” Matthews said. “It’s another kind of sleepy, Heinz-type business that has a lot of potential. The distribution channels really overlap.”

Minneapolis-based General Mills said the company doesn’t comment on speculation.

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