Warren Buffett buys rest of Berkshire Hathaway's utilities, but investors must guess at the price

OMAHA, Neb. — Warren Buffett's Berkshire Hathaway is buying the rest of its utility unit from the estate of a longtime board member who died three years ago, but it's not clear exactly how much it will pay for that 8% stake in the massive utility business.

Berkshire Hathaway Energy said in a regulatory filing Tuesday that it will pay Walter Scott's family $2.4 billion cash and issue a number of Class B Berkshire shares that are equivalent to 1.6 million shares of the utility business, but since the utility's shares aren't publicly traded it is hard to estimate the total value of the deal that's expected to close later this year. Altogether, Berkshire is buying more than 4.4 million shares in the utilities to give it 100% ownership.

“That filing left me with a number of questions, but they don’t have an investor relations function so I don’t expect those questions to be answered,” CFRA Research analyst Cathy Seifert said. “The hope is that when they report earnings there will be more details.”

Des Moines, Iowa-based Berkshire Hathaway Energy includes MidAmerican Energy, Pacificorp and NV Energy in Nevada and a Canadian electricity transmission provider called AltaLink, among other businesses.

Buffett doesn't like to disclose any more than he has to, and the Berkshire Hathaway parent company didn't issue a press release or file anything with the Securities and Exchange Commission, leaving investors to speculate.

Apparently, Buffett doesn't believe this transaction is big enough to have a material impact on Berkshire Hathaway given that it just reported more than $30.3 billion in earnings and was sitting on $277 billion cash in the second quarter.

But a similar transaction when Berkshire bought out Vice Chairman Greg Abel's 1% stake in the utility business two years ago for $870 million suggests this deal with the Scott family is sizeable. Abel is slated to eventually replace Buffett as Berkshire Hathaway's CEO. If Berkshire agreed to pay the same price for the shares the Scott family is selling, the deal should be worth $6.96 billion.

Of course in the past two years, one of Berkshire's biggest utilities, PacifiCorp, has paid out hundreds of millions in settlements related to wildfires in Oregon and California that damaged thousands of homes in 2020, and Berkshire Hathaway has recorded $2.7 billion in wildfire losses.

Buffett was down on the utility industry's prospects in this year's letter to Berkshire Hathaway shareholders. But it's not clear what the current value of the utility divisions shares are today. Buffett didn't immediately respond to questions about the deal with the Scott family, and the utility unit declined to comment beyond what is in the regulatory filing.

In addition to utilities, Berkshire Hathaway owns BNSF railroad, a number of large insurance companies including Geico and a varied assortment of manufacturing and retail firms that includes aviation parts maker Precision Castparts and more well-known brands like Dairy Queen and See's Candy.