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Dominion Energy Isn’t an Elephant for Warren Buffett

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  • Last year, Berkshire Hathaway’s (NYSE:BRK.B) chairman, Warren Buffett, talked about an “elephant-sized acquisition.” The last big acquisition that the company announced was in 2015.
  • Over the weekend, Berkshire Hathaway announced the acquisition of Dominion Energy’s natural gas assets for $4 billion. The deal is valued at $9.7 billion after accounting for the assumption of debt.

Warren Buffett

Many analysts have criticized Warren Buffett for not being able to find suitable avenues to deploy Berkshire Hathaway’s soaring cash pile. The company’s cash pile stood at $137 billion at the end of the first quarter. Warren Buffett surprised markets by not buying stocks even when US stock markets crashed in the first quarter. Notably, he sold airline stocks in April. Berkshire Hathway incurred a massive capital loss on its holdings.

Berkshire Hathaway

In last year’s annual shareholder letter, Warren Buffett talked about an “elephant-sized acquisition.” He was referring to a significantly large company that Berkshire Hathaway could acquire fully. The company’s last major acquisition was in 2015 when it acquired Precision Castparts for $37.2 billion. Warren Buffett said that the deal was expensive.

Warren Buffett missed the Q1 opportunity

Although Buffett has been looking for a big acquisition opportunity, he hasn’t been able to find lucrative deals. Buffett wasn’t able to get deals this year due to the Fed’s swiftness to avert a financial crisis amid the COVID-19 pandemic. During this year’s virtual shareholder meeting, Buffett applauded the Fed for its swiftness in averting a financial crisis. However, he also cautioned that such unprecedented easing would have its own consequences.

Berkshire Hathaway buys Dominion Energy’s natural gas assets

Over the weekend, Berkshire Hathaway announced that it will buy Dominion Energy’s energy transmission and storage assets at an enterprise value of $9.7 billion. As part of the deal, Berkshire Hathaway will also get a 25% stake in the Cove Point LNG facility, which is an LNG export facility.

While the deal looks large, it pales compared to Berkshire Hathaway’s massive cash pile. Dominion Energy isn’t the elephant that Warren Buffett mentioned in last year’s shareholder letter. At best, it looks like a calf!

Berkshire Hathaway has grown tremendously. The company has been struggling to find strong deals.

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