Sempra to buy Oncor for $9.45b

22 August, 2017, 01:16 | Author: Gladys Mathis
  • Reports: Sempra Energy to buy Oncor for $9.45B, beating Buffett

(EFH), the indirect owner of 80% of Texas-based Oncor Electric Delivery Co., for $9.45 billion in cash, topping one by Warren Buffett's Berkshire Hathaway conglomerate.

For now, Sempra has out-bid Berkshire, but Berkshire had worked with Texas regulators to craft a deal that would win their approval, and Sempra's deal is still subject to regulatory approval by the Public Utility Commission of Texas.

The announcement signaled that Oncor's parent company has abandoned the $18 billion deal that Berkshire Hathaway, Buffett's multinational conglomerate, unveiled six weeks ago to much fanfare.

Elliott voiced its support of the Sempra deal Monday, saying in an emailed statement it provides "substantially greater recoveries" to all Energy Future creditors than Berkshire's offer. The transaction's enterprise value would be roughly $18.8 billion.

Shares in Sempra Energy rose by 1.9 percent Monday, the highest rise in shares since March 2015.

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Sources told Reuters earlier that Sempra had decided to make an offer for Oncor in the last three weeks, after seeing the opposition that Berkshire faced from Elliott.

Sempra's bid marks yet another twist in the fate of Energy Future, which was acquired by private equity firms in 2007 for a record-setting $45 billion - but quickly ran into trouble under a huge debt load.

This will be Sempra's largest acquisition since it was formed in 1998. Energy Future filed for bankruptcy in 2014. The company said it would own about 60 percent of Oncor under the deal, which would include financing from megabanks RBC Capital Markets and Morgan Stanley. NextEra sought to rework Oncor's ringfencing provisions to give it access to dividends from the regulated utility, but regulators balked at both attempts. "Our proposal will help bring a satisfactory resolution to Energy Future's bankruptcy case, keep Oncor financially strong, and protect Oncor customers, while addressing the needs of Texas regulators, creditors and the US Bankruptcy Court".

Oncor services about 10 million customers in Texas and employs about 3,700 people.

Sempra has committed to supporting Oncor's ongoing plan to invest $7.5 billion over a five-year period to expand and reinforce its transmission/distribution network. Allen Nye, now Oncor's general counsel, will succeed Shapard as Oncor CEO.

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