Warren Buffett's Berkshire Hathaway has reached a $10 billion deal to acquire Dominion Energy's natural gas transmission and storage business, signaling the famed investor is willing to write big checks in the middle of a raging pandemic.
Berkshire Hathaway Energy, the energy unit of Buffett's conglomerate, will pay about $4 billion in cash and take on $5.7 billion of existing debt.
In exchange, it will bolster its $100 billion asset portfolio with over 7,700 miles of natural gas pipelines, about 900 billion cubic feet of Dominion-operated natural gas storage, and other infrastructure.
Berkshire will gain total ownership of Dominion Energy Transmission, Questar Pipeline, and Carolina Gas Transmission.
It will also own 50% of Iroquois Gas Transmission System, and 25% of Cove Point LNG, one of only six export terminals for liquefied natural gas in the US.
"We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business," Buffett said in a press release on Sunday.
Berkshire expects the deal, which requires approval from competition regulators, to close in the fourth quarter of this year.
Back on the attack
Berkshire's Dominion deal should help to quash claims that Buffett has lost a step and can't cut the kinds of deals he did during previous market downturns.
For example, the famed investor struck lucrative agreements with Goldman Sachs, General Electric, Harley-Davidson, Mars, and other companies during the 2008 financial crisis.
Buffett has been unusually inactive during the coronavirus pandemic, despite his stated desire to deploy a big chunk of Berkshire's $137 billion cash pile.
Instead of going on the offensive during the stock-market crash in March and April, he added to Berkshire's cash reserves in the first quarter, then sold his stakes in the "big four" US airlines.
However, Berkshire's purchase from Dominion — its largest deal since its takeover of Precision Castparts in 2016 — shows Buffett is willing to use his cash, and still able to find opportunities despite the Federal Reserve's unprecedented market interventions.
Buffett is also sticking to his value-investing philosophy rather than giving up and paying higher prices. Natural gas futures tumbled to a 25-year low in June, allowing Buffett to buy Dominion's assets at a discount.
"It's very positive that he's sending a signal for the right deal at the right price, $10 billion or more, 'We're ready to go, we're ready to invest,'" David Kass, a finance professor at the University of Maryland, told Bloomberg.
