Striking the second-biggest deal of his career and making a major move in the energy industry, billionaire investor Warren Buffett agreed...
OMAHA, Neb. — Striking the second-biggest deal of his career and making a major move in the energy industry, billionaire investor Warren Buffett agreed yesterday to pay $5.1 billion in cash to acquire Western states electric utility PacifiCorp.
Only a $16 billion stock purchase of reinsurance giant General Re in 1998 outranks the latest buy for Buffett’s investment vehicle, Berkshire Hathaway, which holds a majority interest in PacifiCorp’s buyer, MidAmerican Energy of Des Moines, Iowa.
“The energy sector has long interested us, and this is the right fit,” Buffett said.
MidAmerican will purchase PacifiCorp from ScottishPower, which acquired the utility in 1999 for $8 billion. In addition to the cash, MidAmerican will assume $4.3 billion in PacifiCorp debt and preferred stock.
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The transaction, the third major acquisition in the U.S. energy industry in the past year, is expected to close in 2006. “It’s going to be one of the bigger energy companies in the country,” said Tim Winter, an analyst at A.G. Edwards & Sons.
Berkshire Hathaway’s Class A shares rose $2,010, or 2.4 percent, to $85,500 yesterday. ScottishPower shares rose 6.3 percent on the London Stock Exchange.
MidAmerican said the deal will create an energy holding company serving approximately 3 million electric and natural-gas customers in 10 states and would have 6.6 million customers worldwide. PacifiCorp will continue to be based in Portland and will retain its name. It will continue operating as Pacific Power in Oregon, Wyoming, Washington state and Northern California, and as Utah Power in Utah and Idaho.
The combined MidAmerican-PacifiCorp will have assets of more than $32 billion, including $25.3 billion in the United States.
Berkshire first bought into MidAmerican Energy in 2000 for $1.24 billion, acquiring about 76 percent of the company. It has increased its stake to 80.5 percent, investing a total of about $3.3 billion.
A month ago, Buffett lamented at Berkshire’s annual meeting that he had about $45 billion in cash and no major acquisitions in sight. “We’d love to have one in the $5 billion to $10 billion range.”