Champion International

Type: Subsidiary (Preferred Investment) Acquired: 1989 ($300 Million Convertible Preferred)

📖 Overview

In 1989, Berkshire Hathaway invested $300 million in Champion International Corporation, a major manufacturer of paper and wood products. This completed a trio of convertible preferred investments that year totaling $1.3 billion (including Gillette and USAir).

🧠 The Investment Logic

Buffett viewed Champion as a well-managed company in a cyclical, commodity-based industry.

The Jockey and the Horse: Like USAir, Buffett classified Champion as a "good horse" in a difficult environment. The value proposition was the stability of the preferred dividend combined with an option on the company's future common stock price.
Management: Buffett expressed high regard for the management's focus on shareholders, which was a prerequisite for Berkshire's "Analytical and Objective" capital role.

1989 Letter | Gillette | USAir

📚 Historical Mentions & Citations (1)

Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.

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1989 LetterExcerpt Available

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The proceeds from our bond sales, along with our excess cash at the beginning of the year and that generated later through earnings, went into the purchase of three convertible preferred stocks. In the first transaction, which took place in July, we purchased $600 million of The Gillette Co. preferred with an 8 3/4% dividend, a mandatory redemption in ten years, and the right to convert into common at $50 per share. We next purchased $358 million of USAir Group, Inc. preferred stock with mandatory redemption in ten years, a dividend of 9 1/4%, and the right to convert into common at $60 per share. Finally, late in the year we purchased $300 million of Champion International Corp. preferred with mandatory redemption in ten years, a 9 1/4% dividend, and the right to convert into common at $38 per share.

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