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Berkshire Ends Deal Drought with Biggest Acquisition in Four Years

Mohit Oberoi
Author: Mohit Oberoi

Last Updated: July 6, 2020
Berkshire Hathaway Warren Buffett

Berkshire Hathaway, that’s run by the legendary Warren Buffett would acquire Dominion Energy’s natural gas transmission and storage assets at an enterprise value of $9.7 billion. After months of inactivity due to the coronavirus pandemic, the deal is set to be Berkshire’s largest acquisition ranked by enterprise value since its purchase of Precision Castparts Corp. in 2016

In the all-cash deal, Berkshire Hathaway would pay Dominion Energy $4 billion and assume another $5.7 billion in debt. As part of the deal, Berkshire Hathaway would acquire over 7,700 miles of natural gas transmission lines, Carolina Gas Transmission, and the Carolina Gas Transmission. In addition to that, it will also acquire 25% of the Cove Point liquefied natural gas facility and 50% of the Iroquois Gas Transmission System.

“We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business,” said Buffett in a statement.

Meanwhile, the deal size hardly moves the needle for Berkshire Hathaway which was sitting on a cash pile of over $137bn at the end of the first quarter. Last year, Buffett talked about a big acquisition that he called an “elephant-sized acquisition.”

However, the Oracle of Omaha, as Buffett’s known as, hasn’t been able to sign any major deal since the acquisition of Precision Castparts in 2015.

Warren Buffett is having a rough patch and Berkshire Hathaway B shares are down 21.0% so far in 2020 underperforming the S&P 500 that’s down only 3.1%. Last year also, Berkshire Hathaway stock underperformed the S&P 500 by 20.1% after accounting for the dividends.

Several analysts have criticized Buffett for the stock’s underperformance and Jim Cramer recently said that Buffett is holding the wrong stocks in his portfolio. Berkshire Hathaway’s portfolio is overweight on banks and consumer companies and Apple is its largest holding.

It also holds a 91.1% stake in Berkshire Hathaway Energy and the business accounted for 12% of Berkshire Hathaway’s operating profit last year.

After Berkshire Hathaway’s underperformance this year, Warren Buffett’s personal wealth has eroded by around $19 billion in 2020, making him the biggest loser among the top 20 billionaires.

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.