Berkshire has identified Buffett successor

Berkshire Hathaway has identified the chief executive who will succeed Warren Buffett when the 81-year-old investor steps down, Buffett said in an annual letter to shareholders on Saturday that did not name the successor.

Succession planning has been a huge issue for shareholders for years, but despite steps to clear up who will run its investments, the company has said little about who would step in for the “Oracle of Omaha” as CEO.

That changed to some degree with the letter, in which Buffett made clear there is a chosen replacement for him now rather than a list from which the board could pick.

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[caption id=“attachment_225367” align=“alignleft” width=“380” caption=“Buffett noted that he is not done with purchases, saying Berkshire would like to make large deals to add to operating earnings.”]  [/caption]

“Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire,” he said, adding there were two backup candidates as well.

While Buffett is in his 80s, he is also known to be in good health and has made clear he does not plan to step down from running the company anytime soon. Famous for a poor diet that relies heavily on beef, he joked in the letter that he could consume another 12 million calories before death.

Though the successor’s name is not known, the most common guess among Berkshire watchers is Ajit Jain, who runs Berkshire’s reinsurance business. As usual, Buffett and his partner Charlie Munger were lavish in their praise for him.

“Charlie would gladly trade me for a second Ajit. Alas, there is none,” Buffett said. One name that was conspicuously absent from the letter, though, was David Sokol.

Once one of Buffett’s star lieutenants and long presumed to be his successor, Sokol left Berkshire last year amid questions of improper stock trading. The episode prompted inquiries from securities regulators and was a major black mark on Buffett’s track record, but there was no mention at all in his summation of the year.

The other part of Berkshire’s succession plan - who will run its huge investment portfolio when Buffett is gone - is much clearer. The company has hired two investment managers, Todd Combs and Ted Weschler, each running or soon to run nearly $2 billion in assets.

Buffett said in the letter that Combs and Weschler would be capable of running Berkshire’s investment portfolio after Buffett is gone. There had been speculation Berkshire might add a third manager down the line.

“Each will be handling a few billion dollars in 2012, but they have the brains, judgment and character to manage our entire portfolio when Charlie and I are no longer running Berkshire,” Buffett said.

He later added that the two would likely help the new CEO make acquisitions down the line. Merger activity was Buffett’s major theme in last year’s letter, famously saying he had a loaded elephant gun to hunt for big deals and an itchy trigger finger.

He satisfied that itch a number of times, most notably spending $9 billion to buy chemical company Lubrizol, $5 billion to backstop Bank of America with preferred shares and $11 billion to become the largest shareholder of IBM .

Buffett noted Saturday he is not done with purchases, saying Berkshire would like to make large deals to add to operating earnings. “My task is clear, and I’m on the prowl,” he said.

Reuters