Buffett's path to US$37.2b deal shows Combs' growing role
[SEATTLE] Todd Combs was a little-known money manager when he was hired by Berkshire Hathaway in 2010 to help Warren Buffett pick stocks. He just helped his boss line up one of his biggest deals ever.
Mr Combs began amassing a stake in Precision Castparts Corp about three years ago, putting the company on Mr Buffett's radar. On Monday, Berkshire agreed to buy the manufacturer of aircraft parts for about US$37.2 billion, including debt.
"I've got to give credit to Todd Combs for this deal," Mr Buffett said on CNBC. "I had really never heard about the company before that, and Todd told me a lot about it." Hiring former hedge-fund managers Mr Combs, 44, and Ted Weschler, 54, was a cornerstone of Buffett's succession plan. The billionaire turns 85 years old this month and has said that the pair will oversee all of Berkshire's investments one day. The deputies have increasingly helped their boss with acquisitions and each has been named chairman of a subsidiary.
"Todd and Ted, as an expansion of management, have been very successful," said Cliff Gallant, an analyst at Nomura Holdings. "Initially, we saw them running the public equity portfolio. Todd and Ted spend a lot of time doing more than that." It's a role Mr Combs has embraced. Prior to joining Omaha, Nebraska-based Berkshire, he worked as an analyst at the Florida banking regulator and for auto-insurer Progressive Corp. He got an MBA at Columbia Business School and eventually started a hedge fund called Castle Point Capital Management in Connecticut.
Mr Combs has credited an early tip fromMr Buffett with helping him approach investing with the rigour required to succeed over the long term. When he was a student at Columbia, the Berkshire chief executive officer came to speak and advised students to read hundreds of pages a week to learn about industries and business, according to a 2013 interview with the Omaha World-Herald. Mr Combs took up the habit and still reads diligently.
Joining Buffett's company has freed Mr Combs from the day-to- day responsibilities of running a fund and allowed him to focus more on investing. It also increased his access to management and capital. He oversees about US$9 billion for Berkshire, allowing him to become one of the biggest shareholders of companies in which he takes a stake.
Mr Buffett said that Precision Castparts CEO Mark Donegan met with Mr Combs about five weeks ago as part of a trip to stay in touch with shareholders.
"I dropped in on the visit in the last 15 minutes or so, and I was very impressed by Mark, and of course I've been impressed by the company," Mr Buffett told CNBC. "Shortly thereafter, I asked Todd to give them a call to see if they would be offended if we made a bid. And they didn't indicate they were particularly receptive, but they also indicated that they would listen." Mr Combs didn't immediately return a message seeking comment.
Working with Mr Buffett has clearly allowed Mr Combs to build his talents as an investor, according to Mr Gallant, the Nomura analyst.
"He could call up almost any CEO in the world and get time," Mr Gallant said. "He has an amazing perch."
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