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Warren Buffett’s MidAmerican Holdings acquire NY Energy (NVE, BRK.A)

Warren Buffett has taken yet another bullish bet on the energy sector. MidAmerican Holdings, a unit held by Buffett’s Berkshire Hathaway (NYSE: BRK.A), announced on Wednesday that it has agreed to purchase NV Energy Inc. (NYSE: NVE), which is Nevada’s largest electricity utility, in a deal valued at $5.6 billion.

According to the terms of the deal, MidAmerican Holdings, which was bought by Mr. Buffett in 2000, will pay $23.73 a share. The deal represents 23% premium over the closing stock price on Wednesday.

The acquisition of NV Energy will be the biggest ever made by MidAmerican Holdings. NV Energy, which supplies both natural gas and electricity in Nevada has customer base of about 1.3 million.

Commenting over the deal, Buffett said that the decision to acquire NV Energy was part of a larger plan to take advantage from the improving macroeconomic environment in Nevada, which was one of the most badly hit states during the housing crisis.

“This is a great fit for Berkshire Hathaway, and we are pleased to make a long-term investment in Nevada’s economy… Through MidAmerican, we have found in NV Energy a great company with similar values, outstanding assets, and a superb management team,” said Mr. Buffett in a statement, according to the dealbook/NY Times.

The purchase of NV Energy represents a second big deal for Mr. Buffett’s owned Berkshire Hathaway. Earlier in February, Berkshire Hathaway entered in an agreement with Brazilian investment group to jointly takeover the Ketchup maker H. J. Heinz in deal estimated at $23.6 billion. However, Mr. Buffett was not very satisfied since his fund wasn’t able to gobble up any big company in 2012. In an annual letter addressed to the shareholders in March, Mr. Buffett expressed disappointment, saying that despite having sufficient cash, (at the beginning of the year the fund had $42 billion in cash), the fund failed to make any big acquisition.

The price paid for NV Energy surpassed MidAmerican Holding’s earlier acquisition of PacifiCorp in 2005 for $5.1 billion from Scottish Power.


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