Buffett buys Norwest Equity portfolio company(2)

Berkshire Hathaway has purchased a gold jewelry maker from Norwest Equity Partners as an add-on acquisition, making the investment firm’s strategy further resemble the private equity industry that its chief executive, Warren Buffett, has repeatedly criticised.

Berkshire purchased Aurafin from Norwest for an undisclosed sum, which it will add on to Bel-Oro International, another gold jewelry manufacturer it purchased this week for an undisclosed sum.

The combination of the two companies, to be called Richline Group, will make Berkshire the world’s largest supplier of gold jewelry to the retail sector. At the same time, Bel-Oro and Aurafin will continue to be marketed as separate brands.

Aurafin was founded in 1982, and then purchased in 1999 by Norwest Equity Partners, which bought 50 percent of the company for an undisclosed amount. The dramatic rise in gold prices in the last two years allowed the company to receive $140 million in financing from Bank of America, Sovereign Bank, and ABN AMRO in August 2006. Aurafin’s customers include major retailers in the US and over 3,500 independent jewelry stores in North America.

Bel-Oro International operates several brands, including Bel-Oro, Pace and Sardelli. It also purchased Michael Anthony in 2005 for around $38 million.

Aurafin and Bel-Oro are not the first investments Berkshire has made in the jewelry sector. Ben Bridge Jeweler, Borsheim’s Fine Jewelry, and Helzberg Diamonds are among its subsidiaries.

Publicly traded Berkshire Hathaway’s core business is insurance, but Buffett uses the company as a vehicle for a wide-ranging array of investments. 
 
Buffett is known for his firm’s long-term investment strategy, as well as his criticism of the private equity industry’s tendency toward “flipping” assets and “exorbitant” fees.

Despite his disavowal of private equity, his firm is increasingly coming to resemble the targets of his criticism: it has many of the same investors, such as the California Public Employees’ Retirement System, and it shares similar investment strategies. This May, Buffett said he was interested in doing mega-deals in the $40 billion to $60 billion range, and would consider selling portfolio companies in the process.