What's going on?
After lying low during lockdown, investment legend Warren Buffett’s Berkshire Hathaway conglomerate has finally let rip with a $10 billion takeover deal – its biggest in over four years. Pardon the gas…
What does this mean?
Berkshire’s buying the natural gas transport and storage business of American firm Dominion Energy for $4 billion, as well as taking on $6 billion of its debt. It’s a natural fit: Berkshire’s existing (and extensive) energy subsidiary already owns the largest such pipeline network in the US (tweet this).
While Berkshire is thus betting on the ongoing importance of natural gas as a “transitional” fuel, Dominion – which will simultaneously scrap a major new pipeline project – appears to be focusing on clean energy. The company is working towards net-zero emissions by 2050, and wants 90% of its future “operating earnings” – i.e. the profit it makes from day-to-day activities – to come from its electric power business.
Why should I care?
The bigger picture: Served Buffett-style.
For years Buffett bemoaned stocks’ rallies to record highs, claiming few companies offered an attractive prospect at the price – so some investors were surprised when he didn’t swoop as markets fell in March. After selling off all its airline shares (plus a number of bank ones) in response to the pandemic, however, Berkshire had $137 billion cash just begging to be put to use. Since many investors pay close attention to (if not simply copy) Warren Buffett, other US energy operations might now appear more attractive to public and private investors alike.
For markets: Deals all over the shop.
Uber confirmed on Monday that its own proposed takeover of US food delivery rival Postmates would go ahead as an “all-share” deal, meaning Postmates’ investors will receive Uber stock as payment. Uber’s tastier money-saving outlook helped send its share price up 4%. Still, looking at recently listed stocks, investors seem happy to gobble up just about any deal.