Why Billionaire Investor Warren Buffett Passed on the Chance to Buy Tiffany & Co.
When LVMH bought Tiffany & Co. for a staggering $16.2 billion late last year, it was widely reported that the famous American jewelry brand turned down the luxury group’s initial offer because it was deemed too low. But it turns out that delay may have been caused by none other than Warren Buffett.
In a new interview published in the Financial Times, the renowned business titan and fourth richest person on Earth revealed that he passed on the opportunity to take over Tiffany & Co. wholesale. Buffett has a history investing in the company but ultimately decided against buying the business in its entirety.
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Buffett’s investment firm Berkshire Hathaway has a staggering $128.2 billion in cash on hand, and Buffett alone is worth just shy of $90 billion—so lack of funds was not the reason Buffett didn’t pull the trigger on this deal. Buffett bought $250 million worth of Tiffany’s bonds in 2009, in the midst of the financial crisis no less, so the company turned to him after Bernard Arnault’s LVMH made an initial offer. It was one he ultimately refused, causing the brand to circle back to LVMH which sealed the deal.
Turning the proposal down might seem surprising at first given Buffett’s clear interest in Tiffany & Co., but it is in keeping with the philosophy that has guided many of his investing decisions. In Berkshire Hathaway’s 2018 report, he wrote, “In recent years, the sensible course for us to follow has been clear: Many stocks have offered far more for our money than we could obtain by purchasing businesses in their entirety. The companies in which we invested offered excellent value, far exceeding that available in takeover transactions.”
Berkshire Hathaway remains a significant stakeholder in several large corporations, including Apple and Coca-Cola, but hasn’t made a bid for an entire business since it bought Precision Castparts in 2015. When a diverse portfolio not only creates greater financial security but also means not having to actually run a company, why bother?
LVMH is moving ahead quickly with its plans to revamp Tiffany after a period of lukewarm growth, but we’ll always wonder what the brand would like if it was operated by the Oracle of Omaha.
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