Warren Buffett has found another elephant.
Berkshire Hathaway's MidAmerican Energy utility said Wednesday that it will buy Nevada electric and natural gas company NV Energy Inc. for $5.6 billion as it expands its footprint in the energy sector. MidAmerican has been aggressively investing in renewable energy projects in recent years, and the companies expect that MidAmerican's experience will help NV Energy develop renewable projects in Nevada, which has vast solar, wind and geothermal resources.
Utility companies also have been slowly consolidating in recent years in the face of weak electric demand and rising costs, related to upgrading aging infrastructure and making power generation cleaner to meet tighter environmental regulations. The hope is to lower borrowing and other costs in an effort to maintain profitability.
The NV deal is one of MidAmerican's biggest and follows Berkshire's $23.3 billion takeover of H.J. Heinz Co. in February. Buffett said in March that many of the companies that Berkshire owns outright — including MidAmerican Energy, Lubrizol chemicals and HomeServices of America — together made 26 smaller acquisitions for $2.3 billion last year. And both Buffett and his companies continue to search for worthy targets on which to spend more of their cash hoards. "We still have plenty of cash and are generating more at a good clip," Buffett wrote in March. "So it's back to work; Charlie and I have again donned our safari outfits and resumed our search for elephants."
NV Energy, which serves customers through Nevada Power Co. and Sierra Pacific Power Co., earned $321.9 million on revenue of $2.98 billion in 2012. In the past year the company's stock price has risen 15 percent. MidAmerican, based in Des Moines, Iowa, will pay $23.75 per share for the company, marking a 23 percent premium to NV's closing price Wednesday. Including debt, the deal is valued at $10.1 billion.
The news sent NV shares up 23 percent to $23.67 in aftermarket trading. The company said that it will remain headquartered in Las Vegas and continue to operate as separate unit under its current name.
MidAmerican and NV Energy say both companies' boards have approved the sale and they expect it to close in the first quarter of 2014, subject to approval by regulators and NV Energy shareholders. The move will expand MidAmerican's customer base by over one million to 8.4 million worldwide and boost its assets to $66 billion.
"This is a great fit for Berkshire Hathaway, and we are pleased to make a long-term investment in Nevada's economy," Buffett said in a statement Wednesday. "We have found in NV Energy a great company with similar values, outstanding assets, and a superb management team."
Berkshire Hathaway Inc. owns about 80 subsidiaries, including clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company's net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.