David Sokol had more conversations with Lubrizol’s bankers at Citigroup “than previously disclosed,” it turns out.A Lubrizol proxy filing reveals that Sokol was informed by Citi bankers as early as December 17 — before he bought a second round of shares in the chemical company — that the Lubrizol board was going to discuss Berkshire Hathaway’s interest in buying the company.
Sokol, one of Warren Buffett’s top executives and long considered a top contender to succeed the Berkshire chief, suddenly resigned from the company last month. He’d bought thousands of shares in Lubrizol before Berkshire acquired it for $9 billion and earned $3 million as a result of the trades.
Citi bankers previously admitted they were shocked at Sokol’s stock purchase in the wake of their meetings.
What We Know Now
We already knew that Sokol had talked with Citi bankers on December 13 about Lubrizol, but an earlier filing “hadn’t indicated whether Mr. Sokol was aware that Lubrizol was taking that interest seriously,” the WSJ reported.
This new filing suggests that Sokol was made well-aware by Citi and Lubrizol that a deal was not a long shot.
The updated proxy filing, submitted late yesterday, shows that Citi bankers decided as early as December 17, during a phone call with Lubrizol’s CEO James Hambrick, that Sokol should be told that Lubrizol’s board was going to be informed about Berkshire’s interest. Citi told Sokol that day.
That means Citi and Lubrizol obviously deemed Berkshire’s curiosity in the company to be serious enough that it required a discussion by the Lubrizol board, all of which was relayed to Sokol.
Hence, it appears Sokol was aware that Lubrizol was taking a potential Berkshire purchase very seriously.
According to the filing,
- On December 13, last year Sokol and Citi met for the first time to discuss a list of companies for potential acquisition. During the meeting, Sokol said that the only company on Citi’s list that he found interesting was Lubrizol. When Sokol learned from Citi’s bankers that Citi had an investment banking relationship with Lubrizol and its CEO James Hambrick , Sokol asked one of the Citi bankers to tell Hambrick that “he was interested in speaking with him and discussing Berkshire Hathaway and Lubrizol, if Mr. Hambrick were available.” Sokol also told Citi that Berkshire doesn’t do hostile takeovers, and “Hambrick should understand that if they met and nothing came of the meeting, their meeting would remain confidential.” So Citi then made Lubrizol aware of these discussions.
- On December 17, 2010, Citi called Hambrick and “relayed the substance of the conversation between Citi and Mr. Sokol on December 13, 2010.” Hambrick indicated he would inform the Board of Berkshire possible interest and discussed that Citi would tell Sokol that. Later that day, Citi told Sokol that Hambrick was going to tell his board about Berkshire’s interest.
- On January 6 this year, the Lubrizol board convened a special meeting to discuss Berkshire’s interest. The board decided “that it needed to retain outside legal counsel and financial advisors to assist it in connection with any response to Mr. Sokol, including the process that the Board should undertake in connection with its review of Berkshire Hathaway’s possible interest in acquiring Lubrizol.”
- On January 10 this year, the Board told Hambrick to arrange a meeting with Sokol to discuss further a Berkshire acquisition.
Sokol went to Buffett about a week after he bought about 96,000 shares in Lubrizol, to recommend Berkshire buy the company.