The Oracle of Omaha didn’t look far for his latest acquisition. Warren Buffett, through his investment firm Berkshire Hathaway, will acquire Omaha-based Oriental Trading Company in a deal valued at about $500 million.
Founded in 1932 by Harry Watanabe, a Japanese immigrant who settled in Omaha, Oriental Trading Co. (OTC) has grown to become the nation’s largest direct seller of inexpensive party supplies, crafts, school supplies, toys, trinkets, and more. Indeed, the OTC website boasts an inventory of more than 40,000 items. Its catalog and online titles include Oriental Trading Company and Terry’s Village, named for Watanabe’s son, Terry, who greatly expanded the business before selling it to Brentwood Associates in 2000.
Its sale to Berkshire, which is expected to close by the end of the month, ends a series of ownership changes for OTC and distances the company from a seven-month stint in bankruptcy from which it emerged in early 2011. OTC’s current owners include Kohlberg Kravis Roberts & Co., which bought a sizable stake in the firm during the Chapter 11 process. In 2006 Brentwood sold the business to The Carlyle Group. Buffett, in a press release announcing the deal said “OTC has a permanent home with Berkshire Hathaway.”
He cited OTC’s leading position in its industry, strong management team, and long-term growth prospects among its attractions. OTC joins Berkshire’s diverse portfolio of more than 50 subsidiary companies, including auto insurance giant GEICO, underwear maker Fruit of the Loom, and confectioner See’s Candies.
Flush with cash, Buffett has been on a deal hunt. While the $500 million that Berkshire is reportedly paying for OTC is hardly material to a company valued at more than $200 billion, it’s a shot in the arm for OTC and represents a healthy return on KKR’s investment. (The New York Times reports KKR should double its initial investment.)
If Buffett throws a party to celebrate his latest acquisition, he’ll know where to go for party favors!