Berkshire Hathaway 2000 Annual Report Download - page 33

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Notes to Consolidated Financial Statements (Continued)
(2) Significant business acquisitions (Continued)
During 1998 and 1999, Berkshire completed four significant business acquisitions. Information concerning these
acquisitions follows. Effective January 7, 1998, Berkshire acquired 100% of the outstanding common stock of
International Dairy Queen, Inc. ("Dairy Queen"). Dairy Queen develops, licenses and services a system of over 6,000
Dairy Queen, Orange Julius and Karmelkorn stores located throughout the United States, Canada, and other foreign
countries, which feature various dairy desserts, beverages, blended fruit drinks, prepared foods, popcorn and snacks.
Effective August 7, 1998, Berkshire acquired all of the outstanding common shares of Executive Jet, Inc.
("Executive Jet"). Executive Jet is the world's leading provider of fractional ownership programs for general aviation
aircraft. Executive Jet currently operates its fractional ownership programs in the United States and Europe.
Effective December 21, 1998, Berkshire acquired all of the outstanding common stock of General Re Corporation
("General Re"). Through its subsidiaries, General Re conducts global reinsurance and related risk management
operations. General Re’s principal U.S. subsidiary, General Reinsurance Corporation, which together with its affiliates,
comprise the largest professional property and casualty reinsurance group domiciled in the United States. General Re
also owns a controlling interest in Kölnische Rückversicherungs-Gesellschaft AG ("Cologne Re"), a major international
reinsurer. General Re operates in 28 countries and provides reinsurance coverage in 130 countries around the world.
In addition, General Re affiliates write excess and surplus lines insurance, provide reinsurance brokerage services,
manage aviation insurance risks, act as business development consultants and reinsurance intermediaries and provide
specialized investment services to the insurance industry. General Re also operates as a dealer in the swap and
derivatives market through Gen Re Securities Holdings Limited (formerly General Re Financial Products Corporation).
In November 1999, Berkshire acquired Jordan’s Furniture, Inc. (“Jordan’s”). Jordan’s operates a furniture retail
business from four locations and is believed to be the largest furniture retailer in the Massachusetts and New Hampshire
areas.
Each of the business acquisitions described above was accounted for under the purchase method. The excess of the
purchase cost of the business over the fair value of net assets acquired was recorded as goodwill of acquired businesses.
(3) Investment in MidAmerican Energy Holdings Company
On October 24, 1999, Berkshire entered into an agreement along with Walter Scott, Jr. and David L. Sokol, to
acquire MidAmerican Energy Holdings Company (“MidAmerican”). The transaction closed on March 14, 2000. Pursuant
to the terms of the agreement, Berkshire invested approximately $1.24 billion in common stock and a non-dividend paying
convertible preferred stock of a newly formed entity that merged with and into MidAmerican, with MidAmerican
continuing as the surviving corporation. Such investment gives Berkshire about a 9.7% voting interest and a 76%
economic interest in MidAmerican on a fully-diluted basis. Berkshire subsidiaries also acquired approximately $455
million of an 11% non-transferable trust preferred security. Under certain conditions, for a period of up to seven years
subsequent to the closing, Berkshire may be required to purchase up to $345 million of additional trust preferred securities.
Mr. Scott, a member of Berkshire’s Board of Directors, controls approximately 86% of the voting interest in MidAmerican.
Mr. Sokol is the CEO of MidAmerican.
Through its retail utility subsidiaries, MidAmerican Energy in the U.S. and Northern Electric in the U.K.,
MidAmerican provides electric service to approximately 1.8 million customers and natural gas service to 1.1 million
customers worldwide. MidAmerican owns interests in over 10,000 net megawatts of diversified power generation facilities
in operation, construction and development.
Berkshire’s aggregate investments in MidAmerican are included in the Consolidated Balance Sheet as Investments i n
MidAmerican Energy Holdings Company. Berkshire is accounting for the common and non-dividend paying convertible
preferred stock pursuant to the equity method. The carrying value of these equity method investments totaled $1,264
million at December 31, 2000.
The Consolidated Statements of Earnings reflect, as income from MidAmerican Energy Holdings Company,
Berkshire’s proportionate share of MidAmerican’s net income with respect to the investments accounted for pursuant to the
equity method, as well as interest earned on the 11% trust preferred security. Income derived from equity method
investments totaled $66 million for the period from March 14, 2000 through December 31, 2000.