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Electric utilities

Warren Buffett's $5.1 Billion Energy Acquisition

Strategic Insights

— 1 min read

Berkshire Hathaway, led by the Oracle of Omaha Warren Buffett, has made its second-largest acquisition ever by buying electric utility PacifiCorp for $5.1 billion from Scottish Power. This deal is a significant expansion of Buffett's energy holdings, and when combined with its majority-owned gas and electric utility MidAmerican Energy, the new company will serve customers in 10 states, providing electricity and natural gas to 6.6 million customers.

Key Takeaways:

  • The purchase is Berkshire Hathaway's second-largest deal ever, after the $22.3 billion acquisition of General Re in 1998.
  • The combined company will have 18,000 employees and be able to generate 17,000 megawatts of power.
  • Investors in both Berkshire Hathaway and Scottish Power's shares instantly applauded the deal, with Berkshire's Class A shares gaining $2,010 to $85,500 and Scottish Power's shares rising $1.85 to $34.21.
  • The acquisition is significant because it marks Berkshire Hathaway's first major deal since 2003 and ends a relative dry spell, with only one acquisition made this year and none in 2004.
  • The combined company will be the largest private energy owner in the nation, with a presence in 10 states.
  • Berkshire Hathaway's move signals a boom in rapid-fire acquisition activity in the energy industry, with 17.1% of the $427 billion in acquisitions this year being in the energy sector.

Statistics:

  • The purchase price of $5.1 billion is Berkshire Hathaway's second-largest acquisition ever.
  • The combined company will serve customers in 10 states.
  • The company will have 18,000 employees.
  • The company will be able to generate 17,000 megawatts of power.
  • The energy industry has seen a surge in acquisitions in 2005, with 17.1% of the $427 billion in acquisitions being in the energy sector.
  • In 2004, the energy industry saw 615 deals, with a value of $110 billion, a 103.6% increase from 2003.

Sources:

  • Thomson Financial
  • Warren Buffett's Berkshire Hathaway
  • Scottish Power
  • Tom Meehan, manager of the Meehan Focus fund
  • Steve Goddard, money manager at New Market
  • Catherine Seifert, a stock analyst at Standard & Poor's

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