Is the Sage of Omaha becoming more acquisitive?

Warren Buffett may be more inclined to acquire industrial companies than to invest in their shares these days.

Buffett's Berkshire Hathaway Inc is spending $4.5 billion for a 60 percent stake in Marmon Holdings Inc, whose products include wire and cable, railroad tank cars and plumbing pipes, and paying more for the rest within seven years.

The agreement to take over Marmon from the Pritzker family, which also owns the Hyatt hotel chain, was reached less than 18 months after Berkshire purchased 80 percent of the stock in Israel's Iscar Metalworking Co for $4 billion.

Only one investment among Berkshire's holdings of industrial shares, as disclosed in its 2006 annual report and in US regulatory filings, has a comparable dollar value.

That company, Burlington Northern Santa Fe Inc, transports products rather than making them.

Berkshire's stake in Burlington Northern, the second-largest US railroad, had a $5.13 billion market value as of Wednesday's close.

The Omaha, Nebraska-based company also owns shares of Norfolk Southern Corp, the country's fourth-largest rail company, and Union Pacific Corp, the biggest.

The three railroads accounted for all but 2.2 percentage points of Berkshire's 10 percent weighting in industrial stocks, according to data compiled by Bloomberg.

The latter figure was the third-highest among the 10 main industry groups in the Standard & Poor's 500 Index.

Financial companies and makers of so-called consumer staples, including beverages and household products, dominate Berkshire's equity investments.

These groups each have about a 36 percent weighting.

Apart from railroads, Berkshire owns shares of five companies that fit into S&P's industrial category: General Electric Co, Ingersoll-Rand Co, Trane Co, United Parcel Service Inc and USG Corp.

All of these investments can be measured in millions of dollars, rather than billions. USG, the biggest North American maker of gypsum wallboard, is the largest holding. Berkshire's stake was valued at $618.7 million as of Wednesday.

UPS, the world's biggest shipper of packages, fits alongside the railroads as a transportation company. GE, the world's third-largest company by market value, generates about half of its revenue from finance, healthcare and media units.

That leaves Ingersoll-Rand, the buyer in a $10 billion takeover now pending, and Trane, the company's target.

Terms of the deal call for payment in cash as well as stock, which means Berkshire's weighting in industrial shares may decline by about half a percentage point when the purchase is completed.

The cash coming from the Ingersoll-Rand transaction isn't the only money that Buffett may have to reinvest.

Berkshire ended the third quarter with 6.34 million shares of Dow Jones & Co, acquired two weeks ago by Rupert Murdoch's News Corp for $60 a share.

Perhaps Buffett's preference for industrial companies will start to spill into his stock buying.

David Wilson is a Bloomberg News columnist. The opinions expressed are his own.

(China Daily 12/28/2007 page16)