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Monday, November 5, 2012

VENDING TIMES: Warren Buffett Buys Fun Express Parent Oriental Trading Co. For $500 Million

Nick Montano

Warren Buffett, Oriental Trading Co., Fun Express, FEC OMAHA, NE -- Berkshire Hathaway Inc. has agreed to buy Oriental Trading Co., an importer of discounted novelty goods sold by mail-order and the parent company of Fun Express, a supplier of prizes to family entertainment centers and coin machine operators. OTC and Warren Buffett's BHI are both headquartered in Omaha. The transaction is expected to close at the end of November.

Berkshire Hathaway has agreed to pay about $500 million for Oriental Trading, according to financial news reports, and that price tag represents a big payday for Oriental Trading's shareholders, KKR & Co. being the largest, which bought the company out of bankruptcy in early 2011. Other shareholders in the firm include hedge funds Crescent Capital Group and Par IV Capital Management LLC.
In 2010, Oriental Trading and its Fun Express subsidiary, which was created about a decade ago to supply the FEC and coin-op amusement industry, filed for Chapter 11 bankruptcy. At the time, the OTC and Fun Express filing showed assets of $10 million to $50 million and total liabilities of $500 million to $1 billion category. Both companies continued to operate after the filing.

Financier Buffett is already involved in newspapers, jewelry and insurance, among other holdings, and many of them are from Omaha; and now the 82-year-old billionaire can add amusement supplies to his local assets.

With more than 40,000 cut-rate party goods in stock, Oriental Trading is the nation's largest direct retailer. The 80-year-old mail-order merchant was suffering from low consumer spending and higher costs when it filed for bankruptcy two years ago.

Oriental Trading has had a string of private-equity owners. Brentwood Associates owned the company until 2006, when it sold a 75% stake to Carlyle Group LP for approximately $750 million in a deal valuing the retailer at about $1 billion, or 10 times EBITDA.

"Oriental Trading is a leader in its industry, has a strong management team and delivers exceptional customer value and service," Buffett said. He credited OTC president Sam Taylor and his team for improving the company and positioning it for long-term growth.

"We are delighted to have them join the Berkshire Hathaway family and continue their quest to make the world more fun," Buffett added. "They have had several changes to ownership in the past, but OTC has a permanent home with Berkshire Hathaway."

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