An investor group including Berkshire Hathaway Inc., a holdingcompany primarily involved in the property and casualty insurancebusinesses, jumped into the energy sector yesterday by purchasingMidAmerican Energy Holdings Co. for over $2 billion. Overall, thetotal enterprise value of the transaction is $9 billion.

After the completion of the transaction, expected by April of2000, MidAmerican will become a privately owned company withpublicly traded fixed-income securities. The deal is subject toMidAmerican shareholder and certain regulatory approvals.

MidAmerican Energy Holdings is the corporate parent ofMidAmerican Energy Co., a utility with 653,000 electric customersand 622,000 natural gas customers in a 10,600-square-mile area fromSioux Falls, SD, to the Quad-Cities areas of Iowa and Illinois.Earlier this year, MidAmerican Energy Co. and the Illinois Chamberof Commerce formed the state’s largest energy marketing program forIllinois businesses and chamber members. As the Chamber’s exclusiveenergy provider, MidAmerican started offering electricity, gas andother energy services to a wide range of customers in Illinois thismonth. It is also the parent of Northern Electric & Gas Co., anelectric and gas supplier to over two million customers in England.Overall, MidAmerican Energy Holdings has 9,800 employees.

The board of directors for the Des Moines, IA-based companyapproved the acquisition over the weekend. The purchase breaks downto $35.05/share and represents a 29% premium over MidAmerican’sclosing price last Friday. Berkshire Hathaway, which is based inOmaha, NE, will invest $1.25 billion in stock, giving it about a75% interest in the company on a fully-diluted basis. Berkshirewill also buy an $800 million issue of non-transferable trustpreferred stock. The other investors, who in total will investapproximately $300 million, are Walter Scott, MidAmerican’s largestindividual shareholder, and certain Scott family interests, andDavid L. Sokol, the chairman and CEO of MidAmerican.

“With no financing contingencies, this transaction shouldprovide an attractive price to shareholders without the time delayand uncertainty inherent in other potential options,” said Sokol.”This transaction represents an endorsement of MidAmerican by twoof the most respected and successful investors in the world. Itprovides better access to capital, an expected improvement incredit quality and association with a long-term investor who allowsmanagement to operate autonomously.”

Warren E. Buffett, CEO of Berkshire Hathaway and one of theworld’s most well known investors, said a main reason for thepurchase was the talent in MidAmerican’s leadership. “We buy goodcompanies with outstanding management and good growth potential ata fair price, and we’re willing to wait longer than some investorsfor that potential to be realized. This investment is right in oursweet spot. If I only had two draft picks out of American business,Walter Scott and David Sokol are the ones I would choose for thisindustry.”

Company headquarters will continue to be in Des Moines, IA, withthe office of the chairman and CEO remaining in Omaha, NE, to focuson strategic planning, mergers and acquisitions and globaldevelopment.

Gregory E. Abel, MidAmerican president said “No managementchanges are planned, no employee reductions will result from thetransaction and the company’s name will stay ‘MidAmerican’. It willbe business as usual, with advantages that did not exist before.”

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