Legendary investor Warren Buffett is best known as the CEO of Berkshire Hathaway Inc (NYSE:BRK-A)(NYSE:BRK-B). The holding company led by Buffett has acquired many companies over the years and also invested in major publicly traded companies, including Apple, which is one of its largest positions.
Here's a look at how the stock has performed since one of its most famous acquisitions.
What Happened: Since 1970, Berkshire Hathaway has acquired over 50 companies and increased the size of its portfolio. The acquisitions along with the company's investments helped power Berkshire Hathaway shares to all-time highs in early 2024.
Companies owned by Berkshire Hathaway include GEICO, Helzberg Diamonds, Fruit of the Loom, Duracell, Benjamin Moore Paint, See's Candies and Dairy Queen.
With over 7,000 locations in more than 20 countries, Dairy Queen is one of the largest ice-cream centered restaurants in the world. Home to items like the Dilly Bar, Peanut Buster Parfait, Orange Julius and Blizzard, Dairy Queen is a go-to place for many Americans looking for ice cream treats.
On Oct. 21, 1997, Berkshire Hathaway announced it was acquiring International Dairy Queen, the parent company of Diary Queen. Under the terms of the deal, Berkshire Hathaway would pay $27 a share in cash or $26 in Berkshire stock to shareholders of the then-publicly traded International Diary Queen.
The acquisition valued the ice cream company at $585 million.
The Dairy Queen Board of Directors approved the deal and spoke positively of Berkshire.
"Our family will vote our entire 35% of the voting shares of Dairy Queen in favor of the merger and will elect to receive Berkshire Hathaway Common Stock for all the Dairy Queen shares owned by us," Dairy Queen Chairman John Mooty said at the time. "We are not interested in trading our Dairy Queen shares for any other securities. I personally consider Berkshire shares to be one of the finest investments that our family could make and we anticipate holding the share indefinitely."
Buffett praised the strong management team of Dairy Queen as one of the reasons for the acquisition.
"Dairy Queen is a business that I like, run by an outstanding management team. Dairy Queen will be a great addition to the Berkshire family," Buffett said.
At the time of the acquisition announcement, there were 5,790 Dairy Queen locations.
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Investing $1,000 in Berkshire Hathaway: Acquiring Dairy Queen was a continuation of a string of deals by Berkshire Hathaway and Buffett from years prior. More deals have been completed since the Dairy Queen acquisition, and Buffett has not signaled this activity will slow down.
Here's a look at how Berkshire Hathaway shares have performed since the Dairy Queen acquisition.
Berkshire Hathaway shares traded at $44,900 when the market opened on Oct. 22, 1997, the day after the deal was announced. A $1,000 investment could have purchased 0.0223 shares of the Class A Berkshire Hathaway shares.
The $1,000 investment would be worth $12,754.18 today, based on a share price of $571,936.17 for Berkshire Hathaway at the time of writing.
This represents a hypothetical return of 1,175.4% since the Dairy Queen acquisition was announced.
For comparison, the SPDR S&P 500 ETF Trust SPY is up 700.7% over the same time period, based on an adjusted price of $60.81 on Oct. 22, 1997 and a price of $487.02 at the time of writing. The ETF tracks the return of the S&P 500 and is used as a gauge of the overall market.
Buffett bought Dairy Queen in 1997. Investors who thought the deal was a good one or anticipated more great deals from Berkshire Hathaway in the future have had a sweet treat of a return on their investments.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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