NEW YORK (CNNfn) - A Warren Buffett-led investment group agreed to acquire MidAmerican Energy Holdings Co. for $2.15 billion cash and assumption of nearly $7 billion in debt Monday, marking the billionaire investor's first foray into the energy sector.
Buffet's Berkshire Hathaway Inc. (BRK.A) investment firm will acquire Des Moines, Iowa-based MidAmerican for $35.05 per share cash, representing a 29 percent premium over the company's Friday closing price of $27.75.
In MidAmerican, Buffet will get global energy company that services 2.2 million electric customers and 1.2 million natural gas customers worldwide, primarily in the Midwest and the United Kingdom, although it also has operations in Australia, Indonesia, the Philippines and Poland.
MidAmerican is also the world's largest independent producer of geothermal energy and became one of the nation's first energy companies to capitalize on a growing number of deregulation laws by expanding its business overseas.
Berkshire gets 75% stake
Joining Berkshire Hathaway in the transaction are MidAmerican Chairman and CEO David Sokol and the company's largest stockholder, Walter Scott, as well as certain Scott family interests. That group will invest roughly $300 million in the newly-acquired company.
Berkshire Hathaway intends to invest approximately $1.25 billion in common stock and a non-dividend paying convertible preferred stock in the acquired company, giving it a 75 percent controlling stake. It also intends to buy an $800 million issue of non-transferable trust preferred stock.
Following the transaction, expected by April 2000, MidAmerican (MEC) will become a privately-held company with publicly traded fixed-income securities.
The company's headquarters will remain in Des Moines, although Sokol will continue to operate out of Omaha, Neb., the companies said. There are no management changes or employee layoffs planned at this time.
Buffett struck several familiar themes in commenting on the acquisition, lauding MidAmerican's strong management and growth potential as the primary reasons for the deal.
"This investment is right in our sweet spot," Buffett said. "If I only had two draft picks out of American business, Walter Scott and David Sokol are the ones I would choose for this industry."
MidAmerican's stock took a quick liking to the deal Monday, climbing 6-3/16 to 33-7/16 in early afternoon trading. Berkshire Hathaway's stock rose 800 to 55,300.