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Buffett's Berkshire to buy private auto dealer Van Tuyl

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October 3
1:09 AM 2014

Warren Buffett's Berkshire Hathaway Inc said on Thursday it would buy the Van Tuyl Group auto dealership, in what the billionaire hinted could be the first of many such purchases as his company extends its longtime bullish view on the U.S. economy.

Berkshire Hathaway did not disclose terms of the agreement, but said in a statement that the dealership would be known as Berkshire Hathaway Automotive after completion of the sale.

"It's reconfirmation of the overarching theme," said Bill Smead, chief investment officer of Smead Capital Management and a Berkshire investor.

"And that is, he wants to put himself in the way of making a pile of money as the millennials emerge from their extended adolescence into being married parents," starting families of their own. "Domestic, domestic, domestic," Smead said.

In an on-camera interview with CNBC on Thursday, Buffett said Berkshire would likely buy "a lot more" dealerships over time. The purchase was an all-cash deal, Buffett added.

Buffett, ranked as the world's third-richest person by Forbes magazine, has long been adamant about seeing opportunities for investment in the United States.

"Though we invest abroad as well, the mother lode of opportunity resides in America," he wrote earlier this year.

Buffett has run Berkshire since 1965, and the Omaha, Nebraska-based company now has more than 80 businesses in such areas as insurance, railroads, utilities and ice cream. It also owns more than $117.5 billion of stocks, including a stake in General Motors.

The Van Tuyl Group transaction is expected to be completed in the first quarter of 2015, according to the Berkshire statement, which added that the dealership has over $8 billion in revenue. Berkshire Hathaway Automotive will be headquartered in Dallas, Texas.

In comparison, AutoNation Inc reported revenue of $17.5 billion and has a market cap of about $5.8 billion, while Penske Automotive Group reported revenue of $14.7 billion and has a market cap of about $3.6 billion.

Van Tuyl is being advised by Stephens Inc, while DLA Piper is its legal adviser on the deal.

Munger, Tolles & Olson LLP is Berkshire's legal adviser.

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