Berkshire umbrella covers growing list of Omaha workers

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Posted: Saturday, May 4, 2013 12:00 am

Warren Buffett isn't known as a big employer in Omaha.

After all, the company's headquarters staff has “ballooned” to only 24 people since it opened in Kiewit Plaza 50 years ago with three, a rate of less than one job added every other year.

But over the past 40 years, Berkshire has bought up a string of companies, and now you'll find Omaha-area employees in Berkshire-owned companies who sell necklaces, calculate insurance premiums, fill ice cream cones, pitch condominiums, deal in dining room sets, trade natural gas, tend electrical generators, hook up rail cars, run printing presses and mail rubber chickens.

Follow along Saturday with the latest from the shareholders meeting, chat with reporter Steve Jordon at 5 p.m. and see all of our Berkshire Hathaway coverage. Omaha.com/Berkshire
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It's a wide-ranging set of Omaha employees who fall under the “Berkshire Hathaway company” banner these days. Counting affiliated real estate agents and seasonal employees, Berkshire's 7,600-plus Omaha-area workforce is one of the metropolitan area's largest private employers, behind Alegent Health Systems' 9,700 but ahead of Union Pacific Corp. and First Data, each with about 5,000.

That means Buffett signs paychecks — indirectly — for two out of every 100 Omaha-area workers. The annual payroll of Berkshire companies in Omaha tops an estimated $330 million, creating an economic impact close to $600 million a year on payroll alone, not counting purchases and sales by the businesses.

Buffett's first Omaha purchase came in 1967 — National Indemnity Co. for $8.5 million from its founder, Jack Ringwalt.

Within a few years, Buffett added a related business for Berkshire: reinsurance, or assuming risks from other insurers in return for fees. He bought the weekly Sun Newspapers of Omaha in 1969 and, in 1983, a majority of the Nebraska Furniture Mart from its founder, Rose Blumkin.

It was the purchase of the Furniture Mart, one of Omaha's largest retailers, that caught the attention of Omahans.

Instead of simply being an investor, Buffett became the owner of a highly visible Omaha business.

Mrs. B, who was nearing 90 at the time, was concerned about passing her business along to family members. “Many, many times when the parents die, the kids fight,” she said at the time. “This way, no one will fight.”

Also read: 75 things to know about Nebraska Furniture Mart

She had another offer from Ostermann's, a well-respected German furniture company. “It was close,” said her late son, Louie, who acted as a partner in the Mart. “She asked, and I said, 'Sell it to Warren.' But it was her choice, not mine.”

Buffett paid $60 million for majority control of the business, which since has added a second full-service store in Kansas City, Kan., and is building another in the Dallas area.

Two years later, Buffett bought Borsheims Fine Jewelry from Ike Friedman, whose father, Louis, had co-founded the Furniture Mart with Mrs. B, his sister-in-law.

With each purchase of an Omaha company, Buffett had solidified his connections to his hometown, and his hometown to him. As local businesses continued to come up for sale, Buffett was becoming a logical option to explore.

Buffett bought two Omaha businesses that had been involved in bankruptcies: Northern Natural Gas Co. and Oriental Trading Co.

Northern started in Omaha as a natural gas pipeline in the 1930s, bringing natural gas to the city's meatpacking houses. It grew into one of the city's major employers, operating 16,500 miles of pipeline and linking with other U.S. pipeline networks.

In a 1985 corporate switcheroo, Northern ended up as a division of Enron Corp. of Houston. When Enron collapsed in 2001 amid allegations of fraud and criminal manipulation of energy prices, Northern's pipeline was one of its few remaining solid assets.

Dynegy Inc. took ownership of Northern, whose operating base had remained in Omaha, after Enron filed for bankruptcy, and then sold it to Berkshire for $1.8 billion.

“It took 16 years, but we brought (local ownership) back to Omaha,” Buffett said at the time. “When the deal is done, it won't leave Omaha again.”

Oriental Trading Co., a catalog and online importer and seller of gifts, novelties, school supplies and other goods, had been sold by the founding Watanabe family to an investment group in 2000. A second investment group bought part ownership, and the 2009 recession tipped the debt-saddled company into bankruptcy court.

Berkshire in Omaha

Omaha-area employment by Berkshire-owned companies:

Berkshire corporate staff: 24

Applied Underwriters: 450

Borsheims: *270

BNSF Railway: 110

CBSHome Real Estate: **600

Central States Indemnity: 250

Dairy Queen: 300

Helzberg Diamonds: 35

Homestate Insurance: 198

MidAmerican Energy: 315

National Indemnity: 410

Nebraska Furniture Mart: 1,600

Northern Natural Gas: 400

Omaha World-Herald: 725

Oriental Trading Co.: 2,000

Total: 7,687

* — Seasonal peak

** — Includes about 500 independent agents affiliated with Berkshire's HomeServices of America

When it emerged with a rebuilt balance sheet and solid operating profits, CEO Sam Taylor approached Buffett and a rapid $500 million deal resulted.

In December 2011, Buffett bought the Omaha World-Herald Co. and started building a network of daily and weekly newspapers, mostly in the South, Atlantic Coast and Midwest.

Some of the other area Berkshire employers have headquarters elsewhere.

MidAmerican Energy, with its headquarters in Des Moines, has a power plant in Council Bluffs. CBSHome Real Estate offices are part of Berkshire's HomeServices division, a nationwide network of agents based in Minneapolis. Applied Underwriters Inc., which provides workers' compensation insurance and other business insurance and services such as payroll processing, has its headquarters in Foster City, Calif., but its main operations are in Omaha.

Other Berkshire companies with employees in Omaha that are based elsewhere include BNSF Railway, Dairy Queen and Helzberg Diamonds.

Buffett said he may not be finished acquiring local businesses.

“Obviously, I've got a bias toward Omaha companies,” he said. “If we hadn't been in Omaha, we would not have ended up with the Omaha companies we have.”

When a business owner proposes selling to Berkshire, he said, “I give them an extra point for being in Omaha.”

The Omaha World-Herald Co. is owned by Berkshire Hathaway Inc.

Contact the writer:

402-444-1080, steve.jordon@owh.com

twitter.com/buffettOWH


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