Warren E. Buffett, chairman of the board and CEO of Berkshire Hathaway Inc., will answer questions at Berkshire’s annual meeting Saturday.(Photo: AP)
DES MOINES — Part of the sport of attending the Berkshire Hathaway annual meeting is speculating about who might one day replace 84-year-old CEO Warren Buffett at the helm of the $ 353 billion company.
“There are a lot of good people and tremendous competition,” said Lawrence Cunningham, a George Washington University law professor, in Omaha for Berkshire’s annual meeting Saturday. It’s the company’s 50th anniversary.
Emerging as a top contender: Greg Abel, CEO of Berkshire Hathaway Energy, the Des Moines-based holdings company that reported $ 1.9 billion in earnings for Berkshire last year. Its businesses include PacifiCorp, MidAmerican Energy and HomeServices of America, the nation’s second-largest real estate company.
Why does Abel stand out among a long list of Berkshire Hathaway’s outstanding lieutenants?
First of all, Berkshire Vice Chairman Charlie Munger mentioned Abel and Ajit Jain, who leads the company’s highly profitable reinsurance business, as “proven performers who would probably be under-described as ‘world-class.’ “
” ‘World-leading’ would be the description I would choose,” 91-year-old Munger wrote in Berkshire Hathaway’s annual report.
Abel has the “right temperament” to run Berkshire Hathaway, said Cunningham, who wrote a book on the subject: Berkshire Beyond Buffett: The Enduring Value of Values.
Abel “is even tempered, even keeled,” a necessary asset for anyone trying to fill the Oracle of Omaha’s oversized financial shoes, Cunningham and others said.
It’s especially necessary with Berkshire’s diverse, decentralized corporate structure. Berkshire’s companies include Benjamin Moore paint, Dairy Queen, BNSF Railway, Clayton Homes and Fruit of the Loom.
A significant vote of confidence, Cunningham said, is that Buffett asked Abel to sit on the new Kraft Heinz Co. board, guiding the $ 49 billion mega-merger of Kraft Foods and AJ Heinz. Berkshire Hathaway and 3G Capital Corp., a private equity firm, backed the deal with $ 10 billion.
Greg Abel, CEO of Berkshire Hathaway Energy. (Photo: The Des Moines Register)
Cunningham said Abel is active making acquisitions for Berkshire Hathaway Energy, investing $ 20 billion to $ 30 billion in corporate purchases.
“They’ve proven very successful,” he said.
Those purchases include NV Energy, a Las Vegas utility that Berkshire Hathaway bought in 2013 for $ 5.6 billion. “That’s a huge part of the job — figuring out what to do with the significant cash that all the entities generate,” Cunningham said.
“All the CEOs make some acquisitions and they’re generally quite successful, but his track record stands out,” he said.
David Kass, a finance professor at the University of Maryland, sees Buffett’s successor narrowed to Jain, Abel and potentially Matt Rose, chairman of BNSF Railway, a company Berkshire purchased in 2010 for $ 44 billion. BNSF Railway has about 48,000 employees, with about $ 3.9 billion in profits last year.
Two other contenders are Todd Combs and Ted Weschler, stock pickers who manage more than $ 14 billion.
Kass believes both Abel, 52, and Jain, 63, would excel as Berkshire Hathaway’s next leader, and could make a great combination — Jain leads companies that spin off lots of cash, and Abel likes to put it to work in new acquisitions.
Kass also believes longevity will be important to Buffett and Munger, who will answer questions from shareholders for hours Saturday.
“The question in Buffett’s mind is who does he think would be the one person who could be CEO of Berkshire over the next 10 years,” Kass said.
Berkshire Hathaway shareholders Chris Yang, right, and his father Baozhong Yang, both of Beijing, hold a banner above a 50th anniversary cake thanking Warren Buffett at the CenturyLink Center exhibit hall in Omaha on Friday. (Photo: AP)
Age is on Abel’s side.
Munger wrote about Jain and Abel: “in some important ways, each is a better business executive than Buffett. And I believe neither Jain nor Abel would 1) leave Berkshire, no matter what someone else offered or 2) desire much change in the Berkshire system.”
Bill Knapp, a Des Moines philanthropist and businessman, doubts that Buffett could find a better candidate than Abel.
Knapp, a friend of Abel’s, said the Canadian transplant is smart, ethical, down-to-earth and warm-hearted.
“Warren Buffett knows how to pick people, and Greg Abel is among the best,” said Knapp, who founded Iowa Realty, the state’s largest real estate company. It’s now owned by Berkshire Hathaway’s HomeServices of America. Knapp’s nephew, Iowa Realty CEO R. Michael Knapp, led the merger.
Omaha residents don’t like the idea of a new CEO at Berkshire Hathaway.
“It’s hard to think of anyone replacing Warren Buffett,” said Deborah Ward, a spokeswoman for the Omaha Convention and Visitors Bureau. “We see him around town. He always looks the same. He’s iconic.”
George Washington’s Cunningham agreed: “I don’t think anyone can match the skill set that Warren has, whether it’s character, asset allocation, business acumen, leadership or charisma. No one will have that combination of skills. But he’s created a company that’s bigger than any one person.”
Knapp said Abel isn’t lobbying for the post. “He’s a team player. He’ll take the job if it’s offered to him, and be happy if it’s not.”
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