By Erik Holm
Sept. 18 (Bloomberg) -- Billionaire investor Warren Buffett's Berkshire Hathaway Inc., which today agreed to buy Constellation Energy Group Inc., is increasing the pace of deals as debt markets freeze up and stocks fall.
The deal to pay $4.7 billion for Constellation is Buffett's eighth acquisition announced since October, compared with six in the prior 12 months, when the largest was a $350 million purchase of an underwear and pajama company. Omaha, Nebraska-based Berkshire, which had $31.2 billion in cash on June 30, is acting as buyouts by competitors slow amid a worldwide credit crunch.
``This is the kind of environment that opens up more opportunities for someone like Berkshire who does still have a lot of cash,'' said Gary Ransom, an analyst with Fox-Pitt Kelton Cochran Caronia Waller. ``Opportunities to put it to work are expanding right now.''
Berkshire's recent deals include the $4.5 billion purchase of Marmon Holdings Inc., the Pritzker family's collection of 125 companies, completed in March. Buffett agreed in April to provide $6.5 billion to help Mars Inc. buy Wm. Wrigley Jr. Co. in a deal giving him a discounted stake in the chewing gum maker and in July he pledged $3 billion to Dow Chemical Co.'s $15.4 billion purchase of Rohm & Haas Co.
Buffett is making deals at a time when others can't. A yearlong contraction in global credit markets has choked funding for leveraged buyouts and reduced corporations' ability to acquire rivals, shrinking the value of announced mergers 29 percent to $2.29 trillion this year from the same period in 2007, Bloomberg data show.
`Extra Money'
``When there are market dislocations, we're always going to take advantage of them,'' Buffett said during the company's annual meeting in May. ``Berkshire will make some extra money out of this.''
The Constellation deal, struck by Berkshire's MidAmerican Energy Holdings Co., was announced as American International Group Inc., the largest U.S. insurer, tries to sell assets to repay an emergency $85 billion loan from the government. Berkshire typically gets about half its revenue from its insurer units, and Buffett said last year he's interested in acquiring ``a great business in any industry that we would understand.''
Investors have been speculating Buffett might bid on financial companies as their market value plunged on losses tied to home loans.
``When the world is zigging, you can count on Buffett to zag,'' said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which holds Berkshire shares. ``While everybody is looking in one direction, Buffett's over in another corner making a deal.''
Energy Trading
Buffett agreed to pay $26.50 a share for Constellation, the largest U.S. power marketer. Until this week, Constellation hadn't traded at a price that low since March 2003. The shares plunged 58 percent this week before today on concern that turmoil in financial markets would wreck Baltimore-based Constellation's energy-trading business.
The deal came together in the past two days, said MidAmerican CEO Greg Abel. ``When there was some financial duress, we could engage quickly,'' he said.
Buffett, 78, bought 85 percent of MidAmerican for $1.7 billion in 2000 and later acquired the rest. He disclosed a 1.4 percent stake in U.S. power producer NRG Energy Inc. in a regulatory filing for the first time last month. NRG has fallen about 30 percent this month.
`Tuck-In' Deals
Buffett welcomes ``tuck-in'' deals when he can acquire businesses and place them under managers ``who have already shown their stuff at Berkshire,'' he said in a letter to shareholders last year.
Earnings from Berkshire's own energy and utilities unit were $208 million in the second quarter, a decline of 10 percent from a year earlier.
Berkshire gained $3,210, or 2.6 percent, to $128,010 at 4:01 p.m. in New York Stock Exchange composite trading. The company has declined 9.6 percent this year.
Buffett transformed Berkshire from a failing textile maker into an enterprise with businesses ranging from ice cream and underwear to corporate jet leasing.
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