Old-guard billionaires who’ve seen and done it all – like Warren Buffett, Kirk Kerkorian and Carl Icahn – are grabbing center stage in the deal-making world with their piles of cash, while Wall Street’s younger debt-choked crowd folds.
The staying power of the canny codger corps surfaced anew in recent days as they nailed down deal after deal, with no fear of the credit crunch problem that’s bogging down and unwinding numerous projects of buyout and hedge funds.
Kerkorian, still running strong at 90, showed his skill for the kill, snapping up 35 percent of struggling oil and gas producer Delta Petroleum for $684 million.
His oil deal came two days after Warren Buffett, 77, launched another big insurance venture. Buffett set up a municipal bond insurance firm in a maneuver to cash in on the credit meltdown that’s dried up insurance protection for cities and towns.
Buffett also pulled off two other deals in the last two weeks, buying Dutch reinsurance firm, NRG NV, for $441 million, and acquiring 60 percent of the Pritzker family’s Marmon Holdings, an industrial conglomerate, for $4.5 billion.
In another insurance deal two weeks ago, Icahn, 71, aimed some of his billions to capture European cash flows by quietly acquiring a large stake in German insurance giant, Munich Re.
Aware that European stock returns are currently triple that of American shares, Icahn made his German play through a Swedish fund he’s backing, Cevian Capital.
“This is the beginning of a major transition from an era of debt to one based on cash,” said Peter A. Cohan, CEO of Peter A. Cohan & Associates, which tracks deals.
“The Buffetts and Kerkorians and their generation grew up in the Great Depression and know what it’s like to get burned from too much debt,” he said.
Targets in the sights of the elder luminaries tend to be unglamorous, profitable, under-priced and overlooked, such as the American scrap metals processor, PSC Metals, which Icahn snapped up for a bargain $335 million three weeks ago.
While Buffett and Kerkorian like to focus on fundamental human pursuits such as gambling, driving, and buying insurance and snack foods, Icahn and other moguls such as Ron Perelman, 64, always have ongoing deals in the volatile world of biotech.
Investors say they’re rewriting the rulebook as the highly leveraged buyout deals dry up.
“They’ve been waiting for this kind of thing to happen – they’ll get more value without having to pay anything extra for it,” Cohan said of their often debt-free wheeling and dealing.