9 Most Expensive Berkshire Hathaway Acquisitions
Berkshire Hathaway’s diversified portfolio makes it one of the most valuable companies in the world. From energy to insurance and even food retail, Berkshire has a portfolio that only a few can replicate. But expanding into other industries is never cheap with Warren Buffett’s company spending billions just to add a single brand in the Berkshire umbrella. Here are the nine most expensive Berkshire Hathaway acquisitions:
1. Duracell - $4.7 Billion
Berkshire bought off Proctor & Gamble’s Duracell battery unit in 2014 in a deal that didn’t only provide steady revenues for the company but also shave its large tax bill. CEO Warren Buffett was pleased with the acquisition as he had invested in the battery business for over two decades. Additionally, Berkshire paying Proctor & Gamble in stock rather than cash saved the former around $1 billion in corporate capital gain taxes.
2. NV Energy - $5.6 Billion
Nevada’s biggest renewable energy company was acquired by Berkshire Hathaway Inc. in 2013 for around $5.6 billion. NV Energy provides geothermal, solar, and wind energy to 1.3 million customers residing throughout the state of Nevada. The deal resulted in NV Energy being integrated into Berkshire’s energy segment, Berkshire Hathaway Energy.
3. Pacificorp - $9.4 Billion
Before the NV Energy purchase, Berkshire spent big money on another energy company, Pacificorp. The acquisition was finalized in 2005 with Berkshire’s MidAmerican Energy Holdings spending around $9.4 billion to close the deal. Pacificorp is an electric utility based in Portland, Oregon, and powers millions of communities in five Western states. With the acquisition, MidAmerican Energy will expand its coverage to three million customers in 10 states and an additional 6.6 million customers outside the US.
4. Lubrizol - $9.7 Billion
Berkshire’s $9.7 billion purchase of Ohio-based Lubrizol is one of the most expensive chemical acquisitions to date. Lubrizol is a chemicals company specializing in the development of ingredients and additives for personal care products, pharmaceuticals, engine oils, gasoline and diesel fuel, and industrial lubricants. The company’s revenue numbers ($4.59 billion in 2009 and $5.42 billion in 2010) convinced Berkshire and Buffett to eventually strike a deal. After the acquisition, Buffett said that Lubrizol is “exactly the sort of company he loves to partner with”.
5. Dominion Energy - $10 Billion
After acquiring NV Energy and Pacificorp, Berkshire continued its massive renewable energy investments by purchasing Dominion Energy’s natural gas transmission and storage business in 2020. The deal would be one of the most recent Berkshire Hathaway purchases and gives the company complete control of Dominion Energy Transmission, Questar Pipeline, and Carolina Gas Transmission.
Berkshire hopes that the acquisition will deliver low-cost and sustainable energy solutions to communities around the states of Virginia, North Carolina, and South Carolina. Dominion Energy operates 5,500 miles of interstate gas transmission pipelines and around 775 billion cubic feet of gas storage.
6. General Reinsurance - $22 Billion
Although the manufacturing segment generates a huge chunk of Berkshire’s revenue, the company earns mostly from its insurance subsidiaries. General Reinsurance (Gen Re) was added to the Berkshire Hathaway portfolio in 1998, three years after insurance company Geico was also brought on board for $2.3 billion.
The deal looked good on paper, but it would haunt Buffett as the acquisition would cost his company billions of dollars. Aside from losing $4.3 billion in terrorism-related policy losses in the 9/11 attacks, Berkshire also lost $800 million after Buffett discovered that the insurance company did not set up reserves to pay for losses from old policies. Gen Re gave more headaches to Buffett as the company was investigated by the Securities and Exchange Commission for alleged manipulation of financial statements in 2005. Fortunately, Buffett and former Gen Re executives avoided legal action as the case was dropped in 2012.
7. Kraft Heinz - $23 Billion
Berkshire Hathaway brands mostly comprise of insurance and manufacturing products. In 2013, the company acquired H.J. Heinz for $23 billion which signaled Buffet’s intent to expand into the food retail business. Heinz merged with Kraft Foods two years later, creating a brand that would combine two of the world’s biggest dairy product and ketchup makers.
But much like the Gen Re deal, the Berkshire Hathaway Heinz acquisition also became a major setback for Berkshire and its CEO. The Securities and Exchange Commission launched an investigation in 2019 which showed Kraft Heinz misstating over three years' worth of financial reports. This resulted in the company announcing a $15.4 billion write-down for the Kraft and Oscar Mayer brands, $12.6 billion in losses, and 36% of dividends to be cut. In a recent interview, Buffett admitted that the Heinz acquisition was too expensive but also noted he does not regret making the purchase.
8. Burlington Northern Santa Fe - $34 Billion
A train model hobbyist himself, Warren Buffett considered his acquisition of Burlington Northern Santa Fe (BNSF) in 2009 a “dream come true”. The BNSF Railway is the largest freight railroad network in the US stretching 32,500 miles and covering 28 states. The railway company is also the largest in terms of revenue. Berkshire aims to significantly increase BNSF’s revenue by investing in technology and efficiency of operations. Buffett also considers the deal an “all-in wager for the economic future of the United States” since the acquisition took place after the country entered into a recession a year earlier.
9. Precision Castparts - $37 Billion
Berkshire’s acquisition of aerospace goods supplier Precision Castparts Corp. (PCC) in 2015 for over $37 billion is the most expensive acquisition in the holding company’s long 181-year history. PCC supplies structural investment castings, forged components, and aircraft engine and industrial gas turbine airfoil castings to the global aerospace market. Among PCC’s client portfolio includes billion-dollar aerospace companies Airbus, Boeing, General Electric, Lockheed Martin, and Northrop Grumman.
Berkshire buying Precision improves an already-robust manufacturing segment which comprises the largest percentage of the company’s revenues. Buffett had been tracking PCC’s operations for years and was also previously interested in the company’s energy-production equipment business.
Huge acquisitions have defined Berkshire Hathaway for the longest time. And there is no stopping the multinational conglomerate anytime soon especially with its current valuation set at $336 billion. The Buffett empire is here to stay.