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Buffett Berkshire Hathaway eases share buyback policy



(Reuters) – Berkshire Hathaway Inc ( BRKa.N ) eliminated on Tuesday a restriction on its ability to repurchase its own stock, an amendment that could help billionaire chairman Warren Buffett more from the conglomerate cash register.

FILE PHOTO: Warren Buffett, CEO of Berkshire Hathaway Inc., pauses in bridge play during the company's annual meeting in Omaha, Nebraska, USA, May 6, 201
8. REUTERS / Rick Wilking / File Photo

The New Berkshire Board approved policies allow Buffett and Vice Chairman Charlie Munger to authorize share buybacks when both believe the buyback price is "below Berkshire's intrinsic value".

Berkshires old policy said the repurchase prices would not exceed 1.2 times the book value per share or assets less liabilities.

The new policy is a big change for Berkshire, where Buffett was under pressure to provide more than $ 108 billion in cash and equivalents.

Berkshire's Class A shares closed at $ 288,500 on Tuesday, up 1.37 times the $ 211,184 per share as of March 31.

Class B shares rose 1.5 percent following the announcement of the new policy.

"It's a pretty significant change," said Steven Check, president of Check Capital Management Inc. of Costa Mesa, California. Berkshire shares comprise approximately 20 percent of the assets of $ 1.5 billion.

"This is a good thing in an environment where Berkshire has a lot of excess cash, nothing to buy, and an undervalued inventory," Check said.

Berkshire increased its buyback threshold in December 2012 to 1.2 times the book value of 1.1.

The Omaha, Nebraska-based company spent $ 1.3 billion on share repurchases this month, mostly from the estate of a long-standing shareholder. Berkshire has not announced any subsequent buybacks under its program.

Known as a bargain hunter, Buffett struggles to accommodate large companies in the Berkshire stable with more than 90 stores in the insurance, rail, energy, retail and other sectors.

In recent months, he has spent some money to build more than $ 40 billion on iPhone maker Apple Inc ( AAPL.O ).

At the Berkshire Annual General Meeting in May, Buffett opposed issuing a special dividend to shareholders, while supporting Apple's intention to increase its own repurchases, which could add value to the stock.

Munger himself warned that some companies only use buybacks to support their own stock prices.

Berkshire said it will not buy back shares under its new policy until it releases the results for the second quarter, which are scheduled for Aug. 3.

It has also claimed that it will not allow buybacks to reduce its cash and equivalents below $ 20 billion.

Reporting by Trevor Hunnicutt and Jonathan Stempel in New York, edited by Richard Chang and Lisa Shumaker


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