MidAmerican Energy, a subsidiary of Buffett's Berkshire Hathaway, announced after the closing bell that it will shell out $5.6 billion in cash to acquire NV Energy, a Nevada-based power provider at a price of $23.75 per share. Including debt the deal has an enterprise value of $10 billion and is expected to close in the first quarter of 2014.
NV Energy, which will keep its Las Vegas headquarters, "will gain access to additional operational and financial resources," said CEO Michael Yackira.
MidAmerican's Greg Abel said his company, with Berkshire behind it, brings to bear "the resources and strength of a global energy partner that lends stability, expertise, and access to competitively priced capital."
The bid represents a 23% premium to the stock's Wednesday closing price and investors weren't betting against the deal in after-hours trading as shares climbed 23.4% to $23.80.
"This is a great fit for Berkshire Hathaway, and we are pleased to make a long-term investment in Nevada's economy," Buffett said in the deal announcement. "Through MidAmerican, we have found in NV Energy a great company with similar values, outstanding assets, and a superb management team."
NV Energy says it serves 2.4 million Nevada citizens and 40 million tourists per year. By adding it to the fold, MidAmerican expects to increase assets to $66 billion and grow its customer base to 8.4 million.
The utilities sector has been hammered of late -- the Utilities Select Sector SPDR is off 8.5% over the last month -- due in large part to a backup in rates, with 10-year Treasury yields particularly active in recent sessions including Wednesday, when the rate on the note climbed above 2.20% before moving lower. Higher rates make the fat dividends offered by utilities less attractive, particularly in an environment where lackluster economic growth could threaten the ability to keep increasing those payouts.
- Oil, Gas, & Consumable Fuels
- NV Energy