Warren Buffett finally found his next crisis-era deal.
His Berkshire Hathaway, which has stayed relatively quiet during the tumult of the coronavirus pandemic, broke its silence at the end of a holiday weekend with its biggest acquisition in more than four years — a nearly $10 billion deal for Dominion Energy's natural gas pipeline and storage assets.
The purchase announced Sunday signaled to the market that Buffett is willing to pounce despite his cautious tone in May about the pandemic, according to David Kass, a professor of finance at the University of Maryland's Robert H. Smith School of Business.
"He's willing to make investments now, of a fairly sizable amount," Kass said. "It's very positive that he's sending a signal for the right deal at the right price, $10 billion or more, 'We're ready to go, we're ready to invest.' "
Buffett, who has crafted Berkshire into a conglomerate valued at $434 billion, built his reputation as an investor able to swoop in during volatile markets to strike unique and complicated deals in past crises. After being stymied on the acquisition front during the recent bull market for stocks, Buffett still wasn't striking any deals during the initial stages of the pandemic and even dumped his stakes in the major U.S. airlines.
For the Dominion Energy assets, Berkshire is paying $4 billion and assuming $5.7 billion in debt.
"We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business," Buffett, who is CEO and chairman of Omaha-based Berkshire Hathaway, said in a statement Sunday.
"I'm inspired to see that, given that he's bearish, he's still willing to make acquisitions where he thinks it makes sense and where it meets Berkshire's hurdle points," said Darren Pollock, a portfolio manager at Cheviot Value Management, which invests in Berkshire shares.
Dominion Energy shares fell 11% in Monday's trading. Berkshire's class A shares, which lost 21% this year through Thursday, rose 2.4%.
Buffett has considered its energy business one of the "lead dogs" of Berkshire's non-insurance operations alongside its railroad. Berkshire's purchase expands its hold in the sector, adding more infrastructure to handle natural gas to its already sprawling energy operations across states such as Nevada and Iowa.
The Dominion deal is set to be Berkshire's largest acquisition ranked by enterprise value since its purchase of Precision Castparts in 2016.
"It's not something that's going to move the needle from a balance-sheet standpoint, but it'll produce several hundred million dollars a year in net income to Berkshire," said Cheviot's Pollock. "That's no paltry sum. That adds up over time."