Warren Buffett, the most famous investor in the world, is finally buying again. Conglomerate Berkshire Hathaway, which Buffett owns 33 percent, paid $ 4 billion for Dominion Energy. With a debt takeover of nearly $ 6 billion, the price of the deal will climb to $ 10 billion.
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This is the first major stock purchase by the Buffett Empire since the beginning of the coronavirus crisis. This was despite a huge drop in stock prices in March for fear of a pandemic, which seemed like an ideal environment for making a big purchase. After all, one of Warren Buffett’s most famous lessons is buying when everyone else is selling their shares.
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Long waiting
At the annual meeting of Berkshire shareholders, Hathaway Buffett revealed in May that the company currently sits on $ 137 billion in cash, which is normally a fairytale asset. In the financial crisis, however, cash becomes almost the holy grail. At the meeting, the Prophet of Omaha also claimed that he did not see any bargain shops on the market yet.
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“We didn’t do anything because we don’t see anything so attractive,” Buffett explained to his shareholders. Compared to the 2008 crisis, he said, companies will get to the money faster thanks to the actions of the US Federal Reserve. “If we see something we really like, we’ll buy it. And he’ll figure it out one day, “Buffett continued.
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Slow Buffett
And on Sunday, Warren Buffett liked what he saw. Dominion is an energy company that focuses on the production of electricity from wind turbines, solar panels, but also natural gas. It supplies power to more than seven million clients spread across the states of Virginia, Ohio, Utah, North and South Carolina. However, some investment analysts say Warren Buffett missed one of the best buying opportunities in March and became too prudent to slow.
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On the other hand, others perceive this acquisition from a different perspective. “Currently, he is willing to invest quite a lot,” David Kass, a professor of economics at the University of Maryland, told Bloomberg. “It is very positive that it is sending a signal that they are ready to jump in and that they are ready to invest,” Kass continued.
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At the same time as the sale agreement was announced, the Dominion canceled the $ 8 billion Atlantic Coast Pipeline project with Duke Energy. The plan to build the pipeline faced long-term problems. Strict regulatory rules and frequent delays kept raising the cost of construction, and companies began to doubt that the pipeline was economically viable at all.
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Gas empire
“We are very proud to add such good natural gas assets to our already strong energy business,” Buffett said in a statement on the transaction. Berkshire will greatly increase its share of the US natural gas market. Berkshire Hathaway Energy, a Berkshire Hathaway energy subsidiary, will carry 18 percent of all interstate natural gas transportation in the United States, up from the current 8 percent. However, the agreement is still subject to regulatory approval, but is expected to be concluded in the fourth quarter of this year.
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Under the Berkshire agreement, Hathaway Energy, of which Berkshire controls 91.1 percent, will acquire a 100 percent stake in Dominion Energy Transmission, Questar Pipeline and Carolina Gas Transmission, a half stake in Iroquois Gas Transmission System and a quarter stake in Cove Point LNG.
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The energy subsidiary accounted for 12 percent of the operating profit of the entire Berkshire Hathaway in 2019, which reached almost $ 24 billion. It is led by Greg Abel, who is also vice chairman of Berkshire Hathaway and could replace Warren Buffett in the company in the future.
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