Berkshire Agrees To Limit Stake in DaVita To 25 Percent – ValueWalk Premium

Berkshire Agrees To Limit Stake in DaVita To 25 Percent

Warren Buffet’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) and DaVita Health Care Partners Inc (NYSE:DVA) agreed not to acquire more than 25 percent of the company.

DaVitaBerkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) also agreed not to push for board seats or seek to buy the company or engage in proxy fights with the company.

The so-called standstill agreement was disclosed Tuesday in a regulatory filing by Denver-based DaVita. Such arrangements are typically arranged by companies seeking to prevent an unsolicited takeover.

Berkshire is already DaVita Health Care Partners Inc (NYSE:DVA)’s largest shareholder with a stake of about 13 percent.

In its Tuesday’s filing with SEC, DaVita informed that it understands that Berkshire Hathaway Inc., and its affiliates may desire to increase their beneficial ownership of the DaVita Health Care Partners Inc (NYSE:DVA)’s common stock. DaVita indicated that at its request, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is entering into the agreement.

Javier Rodriguez and Ted Weschler Buying DaVita Shares

The agreement was signed by DaVita President Javier Rodriguez and Ted Weschler, the former hedge fund manager hired by Buffett to help run Omaha, Nebraska-based Berkshire’s investment portfolio. Ted Weschler joined Berkshire in early 2012, and has been buying DaVita shares.

Weschler and fellow Berkshire investment manager Todd Combs both manage their own portfolios of $5 billion for Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B). Warren Buffett has lauded their performance and said this weekend at his annual meeting that he doesn’t review their investments before they are made.

The largest U.S. operator of dialysis clinics DaVita Health Care Partners Inc (NYSE:DVA) has been the favorite investment of Ted Weschler. Most of the DaVita’s 2,000 dialysis facilities are in the U.S. where it controls a third of the nation’s treatment centers. The aging U.S. population and growing diabetes trend are attracting investors to DaVita’s stocks.

Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) held almost 15 million DaVita shares, a stake of about 14 percent, according to data compiled by Bloomberg based on a March filing. The stake is valued at more than $1.7 billion, based on DaVita’s closing price of $117.56 today.

Under the agreement, which applies when Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s stake is 15 percent or more, Buffett’s company will refrain from proposing “any business combination, merger, tender offer, exchange offer or similar transaction”.

During the last five years, Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) has held stakes exceeding 20 percent in railroad operator Burlington Northern Santa Fe Corp, which it later bought, and credit rating company Moody’s Corporation (NYSE:MCO), whose shares it has recently been selling.

DaVita Health Care Partners Inc (NYSE:DVA) shares rose 3 percent to $121.03 in after-hours trading.


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