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Buffett to Power Vegas Through NV Energy

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Ever since Warren Buffett inked a deal to acquire a 50% stake in Heinz back in February, the world has spent a fair amount of time trying to figure out which company he would gobble up next through Berkshire Hathaway (NYSE: BRK-B  ) (NYSE: BRK-A  ) .

If we could be sure of one thing, however, it was that Buffett would acquire more companies. He even went so far as to bluntly joke: "I'm ready for another elephant. Please, if you see any walking by, just call me."

Powering the city that never sleeps
Sure enough, it seems Buffett's elephant gun has found its mark in the form of Nevada-based NV Energy (UNKNOWN: NVE.DL  ) , the electric utility company which most notably keeps the lights on in Las Vegas, but has also served Nevada customers for over 100 years in a nearly 46,000-square-mile service territory from Elko to Laughlin.

Long story short, Berkshire's MidAmerican Energy subsidiary has agreed to acquire NV Energy for $23.75 per share, or $5.59 billion in cash. When you include debt, the deal boasts an enterprise value closer to $10 billion. 

Of course, the acquisition still needs to be approved by NV Energy shareholders as well as state and federal regulators, but Buffett has already chimed in to say:

"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."

What's more, it's hard to argue that Buffett is overpaying for his latest prize; while the agreed price does represent a 23% premium to NV Energy's closing price Wednesday of $19.28 per share, the stock still trades for a reasonable 17 times last year's earnings even after the pop.

The "powerhouse five" grows even larger
In March, I noted that MidAmerican stands tall as first of Berkshire's five most profitable non-insurance companies, with the other four businesses including Burlington Northern, Iscar, Lubrizol, and Marmon Holdings.

After the deal is complete, NV Energy will still operate under its current name as a subsidiary of MidAmerican Energy. Meanwhile, MidAmerican will then have assets around $66 billion, and its electric and gas utilities will serve approximately 8.4 million customers. What's more, as I reminded investors earlier this month, MidAmerican also accounts for 6% of the United States' total wind generation capacity and will soon own around 14% of our country's solar-generation capabilities.

In the end, similar to the way Berkshire spent more than $2 billion earlier this month to buy the 20% stake in Iscar it didn't already own, this week's deal should also serve as a great reminder Buffett doesn't need to venture far outside his wheelhouse to create value for Berkshire shareholders. To the contrary, sometimes the best way Buffett can put Berkshire's money to work is by building on what he already has.

Thanks to Buffett, Berkshire Hathaway's book value per share has grown a mind-blowing 586,817% over the past 48 years. But with Buffett aging and Berkshire rapidly evolving, is this insurance conglomerate still a buy today? In The Motley Fool's premium report on the company, Berkshire expert Joe Magyer provides investors with key reasons to buy as well as important risks to watch out for. Click here now for instant access to Joe's take on Berkshire!

Read/Post Comments (4) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 30, 2013, at 7:56 AM, bladecrimson wrote:

    I don't see consolidation of corporations as anything other then a control mechanism to keep the elite wealthy from freaking out their going to lose it. That's all they care about! MORE...GREED!

    As for Mr. Buffet, he continues to prove that, just like Paris Hilton and the Kardashians, Money isn't intelligence! Matter of fact, it defies intelligence, because these people live so extravagantly, in denial that the Earth is changing from Human population and is literally dying, as EVERY life-form on this planet is in decline. A wise man knows that wealth and fame are curses upon a man's soul, it is only a commitment to doing what is right and helping those in need that truly is the reward of life!

  • Report this Comment On May 30, 2013, at 9:33 AM, kwill10 wrote:

    ^ Comparing Buffett to the Kardashians? Seriously?? Do you know what his house looks like? Any idea what he's doing with his wealth??

  • Report this Comment On May 30, 2013, at 5:37 PM, iamkilaru wrote:

    Bladecrimson... Mr Buffet does not live extravagantly.... You got your facts wrong...

  • Report this Comment On May 30, 2013, at 7:12 PM, Zinj wrote:

    bladecrimson - I don't care for ostentatious displays of wealth either, but Buffet is famously plain. For decades he always shopped for his personal car among the hail-damaged stock since, to him, cosmetic damage made the car a "good deal". He has lived in the same ordinary house for many decades. There's no security team, barbed wire, etc.

    He used to get laughed at in the press for wearing ill-fitting suits since he didn't want to splurge on clothing which he saw as a silly expense.

    None of this means he's a good guy, necessarily, but it does mean your caricature of him is profoundly and ignorantly wrong.

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