Warren Buffett’s Berkshire Hathaway Takes Stakes in Japan’s Top Five Trading Companies

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They say 90 is the new 70, and in the case of Warren Buffett, that might be true.Berkshire Hathaway Chairman and CEO announced today, on his 90th birthday, that his company has acquired just over 5% of the capital of each of Japan’s five largest trading companies. The companies are Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. Berkshire said it acquired the stakes over a period of approximately 12 months through regular purchases on the Tokyo Stock Exchange. Based on Friday’s closing prices for the trading houses, a 5% stake in each would be valued at around $ 6.25 billion.

Japanese trading companies – known as “sogo shosha” – are conglomerates that import everything from energy and metals to food and textiles into resource-scarce Japan. They also provide services to manufacturers. Trading houses have contributed to the growth of the Japanese economy and contributed to the globalization of business in this country. But as they have expanded their footprint overseas, they have also become more vulnerable to global challenges, such as the financial crisis of ten years ago. Trading houses also face increasing competition from venture capitalists and private equity funds.

For Buffett, movement is not a quick game of trading. Berkshire says he intends to hold the investments for the long term and may increase his stakes in any of the companies to a maximum of 9.9%, depending on price. Berkshire has also committed not to make any purchases beyond a 9.9% stake in any of the companies unless it has received approval from the boards of directors of the trading companies.

In describing its intentions to invest in trading houses, Berkshire pointed out its history of long-term passive holdings in companies like Coca-Cola Co., American Express Co. and Moody’s Corp., each of which spans several decades.

“I am delighted that Berkshire Hathaway is involved in the future of Japan and the five companies we have chosen for investment,” said Buffett, adding that the trading houses had many joint ventures around the world. “I hope that in the future there can be opportunities for mutual benefit,” he said.

Berkshire also said that despite its large yen-denominated bet, it would have little exposure to currency fluctuations as it holds 625.5 billion yen-denominated bonds ($ 5.93 billion) which will mature at various dates from 2023 to 2060.

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