When investment guru Warren Buffett makes a financial move, everybody takes notice, especially during a pandemic.
The deal drought is over — in its first major purchase since the coronavirus pandemic started and the US economy devolved into recession, Buffett’s Berkshire Hathaway said its energy unit will buy the Dominion Energy natural gas transmission and storage network for US$4 billion, CGTN.com reported.
The major energy gamble totals almost US$10 billion, including the assumption of debt, according to a Reuters report.
At his annual shareholder meeting in May, Buffett revealed that Berkshire had built up a record US$137 billion cash hoard as the financial market tanked, and that he hadn’t seen many favorable deals, despite the stock market’s deep swoon, the report said.
The transaction includes more than 7,700 miles (12,390 km) of natural gas transmission lines and 900 billion cubic feet of gas storage, the report said.
Berkshire Hathaway Energy is buying Dominion Energy Transmission, Questar Pipeline, Carolina Gas Transmission, 50% of the Iroquois Gas Transmission System, and 25% of the Cove Point liquefied natural gas facility in Maryland, the report said.
Dominion will retain 50% of Cove Point, Brookfield Asset Management owns 25%, the report said.
The Berkshire unit will also assume US$5.7 billion in debt, giving the transaction a US$9.7 billion enterprise value. It expects a fourth-quarter closing, pending regulatory approvals, the report said.
“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” Buffett said in a statement.
Meanwhile, commentators scrambled to weigh in on the deal’s significance after an uncharacteristically quiet period for the famed investor and his conglomerate, Markets Insider reported.
“If Buffett’s back in, it can’t be that bad,” BNY Mellon’s chief strategist Alicia Levine said on Bloomberg Surveillance.
“You will see more M&A, and that is positive for the market,” she added.
Buffett, who has crafted Berkshire into a conglomerate valued at US$434 billion, built his reputation as an investor able to swoop in during volatile markets to strike unique and complicated deals in past crises, The Financial Post reported.
After being stymied on the acquisition front during the recent bull market for stocks, Buffett still wasn’t striking any deals during the initial stages of the pandemic and even dumped his stakes in the major US airlines.
“I’m inspired to see that, given that he’s bearish, he’s still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire’s hurdle points,” said Darren Pollock, a portfolio manager at Cheviot Value Management, which invests in Berkshire shares.