Warren Buffett’s $10 Billion Buy

Warren Buffett’s $10 Billion Buy

over 3 years ago2 mins

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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.

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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?

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.

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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.

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