Tap Dancing to Work

Buffett to Disney: All thumbs up

November 21, 2012: 11:43 AM ET

By Carol Loomis

This story is from the April 1, 1996 issue of Fortune. It is the full text of an article excerpted in Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012, a Fortune Magazine book, collected and expanded by Carol Loomis.

Warren Buffett and wife Susie ham it up at a February Cap Cities management meeting, weeks before Disney's Eisner (left) and President Michael Ovitz learned of his plans.

Warren Buffett and wife Susie ham it up at a February Cap Cities management meeting, weeks before Disney's Eisner (left) and President Michael Ovitz learned of his plans.

FORTUNE -- Just in from Omaha and making a do-it-yourself delivery, Berkshire Hathaway (BRKA) Chairman Warren E. Buffett strolled into the downtown Manhattan offices of Harris Trust on March 5 and handed two envelopes to a Harris officer. In envelope No. 1 was stock worth, gulp, $2.5 billion: Berkshire's 20 million shares of Capital Cities/ABC, being delivered to that company's purchaser, Walt Disney Co. (DIS)

In envelope No. 2, sealed and marked "Do not open until 4:30 P.M. on March 7," were Buffett's wishes -- kept secret from even the managements of Disney and Cap Cities -- as to how he wanted Berkshire to be paid for the contents of envelope No. 1. Like any ordinary Cap Cities shareholder, Buffett had the choice of taking the standard package, which was Disney stock plus cash, or of requesting all stock, or all cash.

And the envelope, please? Giving Disney a huge thumbs up, Buffett asked for stock only. Talking to Disney CEO Michael Eisner late on the 7th, Buffett said he'd paid the company and its boss his ultimate compliment by entrusting them with Berkshire's money. Eisner assured Buffett he'd work to make the decision right.

Because Berkshire's allotment of Disney stock will depend partly on the choices made by other Cap Cities shareholders, its exact stake in Mickey Mouse & Co. wasn't immediately known. But even 20 million Disney shares -- the minimum Berkshire will receive -- would give it about a 3% stake.

In Berkshire's 1995 annual report, due out momentarily, Buffett will acknowledge that he is returning to the scene of an investing crime. Attracted to Disney in 1966 by its film library, its burgeoning theme-park business, and its peanut-gallery stock price -- the market capitalization of the entire company was less than $90 million -- Buffett invested a large chunk of Buffett Partnership money in the stock at a split-adjusted price of 31 cents a share. The stock recently sold for $65 -- but did Buffett hang around for the ride? No. He sold out in 1967 at 48 cents a share. "Oh, well," Buffett says, with surely a wince, "it's nice to be back."

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