In 2012, Jimmy Haslam paid $1 billion for the Browns. An ongoing legal fight between Haslam and Warren Buffett’s Berkshire Hathaway could involve even more than that.
As explained by Jonathan Weil of the Wall Street Journal, the battle over the value of the remaining 20 percent of Pilot Corp. to be purchased by Berkshire Hathaway could be worth as much as $1.2 billion.
The question is the value of the company. The more valuable it is, the more Buffett must pay for the final 20 percent. The lower the value, the less Buffett will pay.
The litigation centers on allegations by Haslam that Buffett is trying to do things to drive down the value. Buffett, in turn, claims that Haslam is trying to do things to increase the value.
That resulted in a recent allegation by Buffett that Haslam tried to bribe Pilot executives to inflate profits and, in turn, to increase the company’s value. Pilot has dismissed that allegation as “strategic inventions” and a “wild theory.”
Berkshire Hathaway already has paid $11 billion for 80 percent of the company. It’s that last 20 percent that has created a major mess.
It’s strange to think that really rich, and presumably really smart, people would allow something like this to happen. The parties either ignored or underestimated the potential havoc that could come from not having a clear and specific plan in place for applying an eventual value to the final 20 percent of the company.
Now, havoc has arrived. The legal process will sort it all out. If, along the way, Buffett’s people develop evidence showing that the allegation of attempted bribes by Haslam has merit, it will be very interesting to see whether the league does anything about it.