Buffett buys PacifiCorp for $9.4 bln Tue May 24, 2005 04:35 AM ET By Sudip Kar-Gupta
Berkshire Hathaway CEO Warren Buffett (L) gestures while speaking during a press conference at the Seventh Annual Microsoft CEO Summit at the company's headquarters in Redmond, Washington on May 21, 2003. Photo by null
LONDON (Reuters) - Billionaire investor Warren Buffett has agreed to buy U.S. electricity producer PacifiCorp for $9.4 billion from British utility Scottish Power, which put the unit up for sale after missing earnings targets.
Scottish Power said on Tuesday that it was selling PacifiCorp to MidAmerican Energy, a Des Moines, Iowa-based unit of Buffett's Berkshire Hathaway.
Scottish Power added it would return around $4.5 billion of the proceeds to Scottish Power shareholders. MidAmerican agreed to pay $5.1 billion in cash plus approximately $4.3 billion in net debt and preferred stock.
"We are excited to be making this long-term investment, through MidAmerican, in the premier energy company in the West. PacifiCorp is a great company with outstanding assets," Buffett said in a statement.
Shares in Scottish Power, Britain's second-biggest electricity stock, rose as much as 8.5 percent to an intraday high of 479-3/4 pence -- Scottish Power's highest price since September 2001.
"The price is disappointing but it's good for sentiment," said Williams de Broe analyst Angelos Anastasiou.
PACIFICORP'S PROBLEMS
Scottish Power bought PacifiCorp in 1999 for around $10 billion, and the British company said the sale would lead to an impairment charge of 927 million pounds ($1.7 billion).
The U.S. electricity producer accounted for around 50 percent of overall earnings but it had recently suffered from bad weather and plant outages, and in 2004 Scottish Power said PacifiCorp would miss its full-year earnings target.
The company decided it was better to sell PacifiCorp than continue investing in the business to improve returns.
"This was proving to be a difficult year for PacifiCorp," Scottish Power Chief Executive Ian Russell told reporters.
Scottish Power also reported that pretax profit before goodwill and exceptional items for the year ending March 31 rose 10 percent to 1.015 billion pounds, the first time the company had made a billion pound profit.
Analysts had forecast on average a pretax profit of 990.5 million pounds. Annual earnings per share (EPS) rose 10 percent to 40.22 pence, also beating market forecasts.
The total dividend rose 10 percent to 22.50 pence.
Scottish Power shares have outperformed the DJ Stoxx European utility sector by about 8 percent since the start of 2005.
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