In an effort to widen its presence in the energy sector, Berkshire Hathaway Inc.’s (BRK.A) (BRK.B), energy company MidAmerican Energy Holdings has announced to buy NV Energy Inc. for $5.6 billion or $23.75 per share. This price represents a 23% premium to NV's Wednesday closing price of $23.67.
Based in Nevada, NV Energy is a electric and natural gas company.
The deal will be a strategic fit for Berkshire which already derives 22% of revenue from energy business.
The news sent Berkshire’s shares soaring up 1.2% which closed at $113.03.
The deal is expected to see light in the first quarter of 2014. Berkshire’s huge cash holding of $48 billion will fund the acquisition.
The deal will enable Berkshire to serve nearly 1.3 million electric and natural gas customers in Nevada. MidAmerican already serves 7.1 million Americans across 10 states. The deal will also add assets to MidAmerican’s business which will be worth $66 billion.
Berkshire bought MidAmerican in 2000.
Earlier this year Berkshire made a big acquisition of H. J. Heinz Company ( HNZ) for $23.6 billion. Buffett’s long-held acquisition strategy is to acquire businesses with consistent earning power, good returns on equity and able and honest management at sensible prices.
In 2012, Berkshire completed several smaller-sized business acquisitions, most of which were sort of “bolt-on” acquisitions to several of its existing business operations. Aggregate consideration paid in 2012 for acquisitions was approximately $3.2 billion, which included $438 million for entities that will develop, construct and subsequently operate renewable energy generation facilities.
Berkshire has grown over decades by making numerous acquisitions and at present holds over 80 operating subsidiaries under it. These subsidiaries are operated as independent entities with respective managers responsible for operating decisions.
Berkshire Hathaway retains a Zacks Rank #2 (Buy). Other players from the same industry such as Alleghany Corp. ( Y) and Hanover Insurance Group Inc. ( THG) both with Zacks Rank #1(Strong Buy) are worth considering.
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