MidAmerican Energy Holdings Co., an Iowa-based utility overseen by investment guru Warren Buffett, has reached a tentative agreement to purchase Baltimore-based Constellation Energy Group for $4.7 billion, the company announced today.
Constellation said the two companies expect to have a definitive merger agreement in place by the close of business Friday.
“The financial services sector and energy commodity markets have witnessed unprecedented volatility,” Constellation Chairman, President, and CEO Mayo Shattuck said in a release. “Backed by the significant industry expertise and financial stability of MidAmerican and Berkshire Hathaway, Constellation Energy will build on its reputation as a first-choice energy solution provider for our many customers.”
Constellation shares fell 58 percent between Monday morning and the market’s close Wednesday, threatening the energy trader’s ongoing operations.
“MidAmerican has been a wonderful steward of its energy assets and the acquisition of Constellation Energy, when completed, will prove beneficial to all constituents,” said Warren E. Buffett, chairman of Berkshire Hathaway, in a statement.
Analysts said the match makes sense — Constellation’s model uses short-term loans to place bets on energy holdings, and MidAmerican is backed by the financial strength of powerhouse Berkshire Hathaway.
“If you have a financial partner that’s strong with deep pockets, which last time I checked Warren Buffet has, Constellation’s business model makes a lot of sense,” said Paul Justice, a Constellation analyst with Chicago-based investment research firm Morningstar.
