Investment guru Warren Buffett has entered the container leasing business. Buffett’s company, Berkshire Hathaway Inc, has agreed to buy Westport, CT-based Xtra Corp. for about $1.3 billion in cash and assumed debt – with the hope shipping demand will rebound with the economy.
Xtra Corp. will become a wholly-owned subsidiary of Buffett’s Omaha-based investment company, which is offering $55 per share to holders of Xtra common stock. The company, which leases over-the-road trailers and intermodal equipment, will remain headquartered in Connecticut.
“Xtra is an outstanding business with a wonderful reputation,” said Buffett. “It will be a great addition to the Berkshire Hathaway group of businesses.”
Buffett's investment comes as shipping companies that lease Xtra's equipment struggle in the sluggish U.S. economy. Xtra today said fiscal third-quarter earnings fell 57% because of lower freight demand and increased costs. In the past 12 months, Berkshire shares gained 23% while the Standard & Poor's 500 Index slid 15%.
Xtra 's fleet of about 260,000 units includes approximately 90,000 over-the-road trailers. The company said its utilization rate for equipment in April, May and June fell to 76% from 83% a year earlier as international and domestic shipments by customers declined.