Sempra Energy bids $9.45B for Oncor, topping Buffett offer

22 August, 2017, 21:42 | Author: Terri Saunders
  • Warren Buffett chairman and chief executive officer of Berkshire Hathaway

On August 20, 2017, California-based Sempra Energy (SRE) declared its agreement to buy Texas-based Oncor Electric from Energy Future Holdings for $9.45 billion. To fund the purchase, Sempra will use its own debt and equity, third-party equity and $3 billion of anticipated investment-grade debt within Energy Future, which will be reorganized.

Sempra is the latest suitor seeking to take over Oncor since its parent, Energy Future, declared bankruptcy in 2014.

Berkshire Hathaway's (BRK.B) lost the battle for Oncor. The move triggered a public battle for the Texas utility. During what was scheduled to be a hearing to approve the deal with Berkshire Hathaway, Energy Future attorney Chad J. Husnick of Kirkland & Ellis LLP told the court. The hedge fund is among Energy Future's biggest debt holders.

Berkshire Hathaway CEO Warren Buffett during the Berkshire Hathaway annual meeting weekend in Omaha, Nebraska, on May 7. Berkshire had signaled it did not plan to lift its bid.

Last week, Buffett had made it clear that Berkshire Hathaway would not go any higher than $9 billion for the utility, even as Elliott Management, the largest creditor of Oncor's parent company, offered US$9.3 billion. In the process, Sempra would pay approximately $9.45 billion for the acquisition. Sempra will have to match that part of the Berkshire offer or the bid will be rejected.

The deal is key to ending Energy Future's bankruptcy, as the company has now spent more than three years working to restructure nearly $50 billion of debt. However, the deal hasn't received regulators' approval yet.

Elliott had opposed the Berkshire bid, which is said undervalued Oncor.

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Sempra shares rose as much as 1.9 percent Monday, the most since March 15.

The buyout, expected to be over by the first half of 2018, will be accretive to Sempra Energy's earnings beginning in 2018.

Texas is one of the fastest growing states in the country.

Including Oncor's debt, the enterprise value of Sempra's proposed offer for Oncor is $18.8 billion.

Berkshire emerged as a credible buyer for Oncor about a month ago after several suitors were blocked by Texas regulators with a $US9 billion cash offer, (Oncor has around $US9 billion in debt).

Information for this article was contributed by Scott Deveau, Matthew Monks, Noah Buhayar and Dawn McCarty of Bloomberg News.

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