What Berkshire’s life after Buffett looks like

0:02Good morning from the Financial Times. Today is Tuesday, June 2nd, and this is your FT News Briefing. The U.S. may deploy more nuclear weapons in Europe, and Anthropik is making moves there too. Plus, we get a look at Berkshire Hathaway's first steps after Warren Buffett. I think what we're seeing here is a prelude to probably Berkshire's deal-making machine firing up again. I'm Mark Filippino, and here's the news you need to start your day.

0:43The U.S. has not exactly instilled a lot of confidence in Europe when it comes to conventional military support. President Donald Trump has threatened to move troops and critical weapons systems away from the continent. Now, the U.S. is signaling that it's open to expanding its nuclear weapons deployments. Six countries currently host so-called U.S. dual-capable aircraft, which are able to deliver nuclear strikes. But the talks could open the door for more countries to have these. Two sources told the FT the discussions were intended to show the U.S. commitment to providing a nuclear umbrella.

1:16We should say that talks are highly confidential and might not go anywhere, But sources say that countries on NATO's eastern flank, including Poland and some Baltic states, are interested in the potential offer.

1:33Big start of the week for Anthropik. The maker of the Claude chatbot filed for an IPO yesterday that would value the company at more than a trillion dollars. Puts it right smack in the middle of this race with OpenAI and SpaceX. Both are planning to go public this year. Now, that was the headline-grabbing news that kind of buried another important development. Anthropic is offering the European Union access to its AI model mythos. Here to discuss is the FT's Laura Dubois in Brussels. Hi, Laura. Hi. So how big of a deal is this? This is a really big deal because the U.S. had so far limited access to this really powerful model to most U.S.-based companies in the U.K.

2:13And so far, the U.S. was pretty lukewarm on extending wider access to this model. And the reason is that this model is so powerful that it can detect cyber vulnerabilities really easily. And Anthropic was basically worried that it could be used to stage cyber attacks if it fell into the wrong hands. And the fact that the EU is now also in this group, it's very significant for Brussels and will sort of help the institutions stress test their systems. Yeah. And just to drill down on those concerns, people are worried that Mythos could actually be so sophisticated that it's basically working too well.

2:48It could outpace current cybersecurity defenses. Laura, are there conditions that address those concerns that the EU wants in its deal with Anthropic? Yes. So the terms and conditions of the access still have to be discussed. Basically, EU officials traveled to San Francisco last week to discuss this. And then Anthropic over the weekend extended the invitation to the EU cybersecurity agency, which is called INISA. But the negotiations are now going to continue because there are also safety concerns on the EU side. Because the model is so powerful in scanning for cybersecurity vulnerabilities, it also means that Anthropic would sort of have an insight into the EU systems and where they are vulnerable.

3:27So basically now officials just really want to make sure that all the terms and conditions are set in a way that there are no safety concerns for the EU as well. How does this all fit into the EU's larger goals? Because I know that they are focusing a lot on tech right now. So the EU has tried to wean itself off of its dependency on US tech for a longer time now. And tech sovereignty is a really big topic of discussion here in Brussels. And actually this week, the commission is coming with a so-called tech sovereignty package, which will include new rules and sort of incentive for companies to invest in Europe and build data centers here.

4:06It will also help boost European producers like SAP or Mr. Owl to sort of really have the conditions to produce cloud infrastructure and other things that you need to power AI from Europe. So we're not so reliant on US providers anymore. And it's kind of interesting this anthropic deal comes at the same time where this package is coming. That's the FT's Laura Dubois. Thanks, Laura. Thank you.

4:37The U.S.-Israel conflict with Iran is in its third month, and Tehran is calling it quits on peace talks for now. Yesterday, Iran halted back-channel negotiations with Washington, as according to Tasneem News Agency, which is affiliated with Iran's Revolutionary Guard. Tasneem said Iran is protesting Israel's further expansion into Lebanon. Israel says it's targeting the militant group Hezbollah, but Tehran calls the bombings of the Iran-backed group, quote, ceasefire violations. U.S. President Donald Trump yesterday said he wasn't informed that Iran halted negotiations. He told NBC News it's fine if the talks are over, and quote, it doesn't mean we're going to go and start dropping bombs all over there.

5:22Berkshire Hathaway is acquiring home builder Taylor Morrison. It's Berkshire's first major deal since Warren Buffett retired as its CEO, and it signals that the holding company is betting big on the U.S. property sector. Oliver Barnes is the FT's U.S. deals and activism correspondent. He joins me now to talk about why this is a bit of a surprising move. Hey, Oliver. Hey, Mark. So tell me about this acquisition under new CEO Greg Abel. What's the vision here? Well, it's both kind of a surprising move and not. Berkshire has a ton of exposure to the home building and real estate sector. They sold out of a lot of businesses, but built their position in Lena, which is a rival to Taylor Morrison.

6:05They also own a paint company, an insulation company. They own a big real estate brokerage. So this is a sector that they clearly liked. and it's kind of classic Berkshire to do a deal in an industry that's pretty cyclical. And at the moment, the home building sector in the U.S. is in a bit of a tricky spot. There's a glut of inventory, which the home builders are struggling to get rid of. And at the same time, like actual new builds of single family homes has slowed. Yeah, tell me a little bit more about this bet, because it does seem risky. What does Berkshire Hathaway want to do with this kind of volatile sector?

6:45Well, is it risky? I mean, it's quite a low premium deal. It values the company's equity at$6.8 billion, puts the enterprise value, including debt at$8.5 billion. What do they want to do? Berkshire owns another home builder called Clayton Homes, which tends to play in the kind of lower end of the market. and effectively they want to combine those two companies. While home building is not growing at the moment, there are suggestions and projections that it could grow and that then they could benefit from that upside. Of course, there are risks, right? Home building is very linked to demand for homes, which itself is linked to interest rates and mortgage rates.

7:26And now with the rise of inflation again in the US, it's possible that the anticipation for interest rates to come down, that may not happen anymore, right? So there are risks and there are forks in the road. But the idea here for Berkshire is buying more exposure to a sector that they like. Right. All right. So I guess the other aspect of this is Greg Abel, who obviously came in to replace the famous Warren Buffett. Were people expecting him to make big acquisitions like this one so soon after taking the helm? Well, Greg Abel in his time at Berkshire was a dealmaker, right? He did do M &A. And broadly speaking, in the final years of Buffett's tenure as CEO, Berkshire's dealmaking machine slowed and they've been incredibly cautious.

8:10They've also been cautious on the equity side. They've pulled a lot of money out the market and have a huge cash pile. Berkshire's sitting on$400 billion of cash and short term treasury bills, which they can put to work at any point. And I think what we're seeing here is a prelude to probably Berkshire's dealmaking machine firing up again. So what does that look like? What kind of deal should we expect to see, Oliver? Well, Berkshire had exposure to home builders, has now gone and done a big home building deal. They've got a lot of exposure in the insurance sector. They could do an insurance deal.

8:43They've got exposure in oil and gas. They could do an oil and gas deal. When you're run by an investor who is 90 plus years old and was nearing retirement and tends to take a cautious mindset, you can understand why maybe taking big swings at headline M &A was not really on the cards for Berkshire in the past few years. And considering the markets in quite a toppy place at the moment, maybe those valuations were too high for it. I think what we could expect, though, is that Berkshire will now, under Greg Abel, look for opportunities to put money into private investments. And when you talk to advisors, that's definitely what they're seeing too.

9:28Oliver Barnes covers deals for the FT from New York. Thanks, Oliver. Thanks, Mark.

9:37You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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