- Warren Buffett’s Berkshire Hathaway struck a $ 10 billion deal to buy Dominion Energy’s natural gas transmission and storage business.
- The Berkshire energy unit will pay about $ 4 billion in cash and take on $ 5.7 billion in existing debt in exchange for more than 7,700 miles of pipes, 900 billion cubic feet of storage and other assets.
- “We are very proud to add such a large portfolio of natural gas assets to our already strong energy business,” Buffett said in a press release on Sunday.
- The deal is Berkshire’s largest since its acquisition of Precision Castparts in 2016, and comes after Buffett was criticized for its inactivity during the pandemic.
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Warren Buffett’s Berkshire Hathaway struck a $ 10 billion deal to acquire Dominion Energy’s natural gas transmission and storage business, indicating that the famous investor is willing to write big checks amid a furious pandemic.
Berkshire Hathaway Energy, the energy unit of the Buffett conglomerate, will pay around $ 4 billion in cash and take on $ 5.7 billion of existing debt.
In return, it will bolster its $ 100 billion asset portfolio with more than 7,700 miles of natural gas pipelines, approximately 900 billion cubic feet of natural gas storage operated by Dominion, and other infrastructure.
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Berkshire will acquire full ownership of Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission.
It will also own 50% of the Iroquois gas transmission system and 25% of Cove Point LNG, one of the six liquefied natural gas export terminals in the United States.
“We are very proud to add such a large portfolio of natural gas assets to our already strong energy business,” Buffett said in a press release on Sunday.
Berkshire expects the deal, which requires approval from competition regulators, to close in the fourth quarter of this year.
Back to the attack
Berkshire’s deal with Dominion should help nullify claims that Buffett has missed a step and cannot cut the kind of deals he made during previous market recessions.
For example, the famous investor struck lucrative deals with Goldman Sachs, General Electric, Harley-Davidson, Mars, and other companies during the 2008 financial crisis.
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Buffett has been unusually idle during the coronavirus pandemic, despite his stated desire to roll out a large chunk of Berkshire’s $ 137 billion cash.
Rather than go on the offensive during the stock market crash in March and April, it added to Berkshire’s cash reserves in the first quarter and then sold its stakes in the “Big Four” American airlines.
However, the Berkshire purchase from Dominion, his biggest deal since his acquisition of Precision Castparts in 2016, shows that Buffett is willing to use his cash and can still find opportunities despite unprecedented market interventions by the Federal Reserve.
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Buffett also sticks to his value investment philosophy instead of giving up and paying higher prices. Natural gas futures fell to a 25-year low in June, allowing Buffett to buy Dominion’s assets at a discount.
“It is very positive that I am sending a signal for the right deal at the right price, $ 10 billion or more, ‘We are ready to start, we are ready to invest,'” David Kass, professor of finance at the University of Maryland, told him he said to Bloomberg.
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