Sempra Energy to buy Oncor for $9.45 billion in blow for Berkshire

Buffett and Anka

Buffett and Anka

Elliott had tried to put together its own bid for $9.3 billion to buy Oncor but ultimately chose to back the Sempra deal, which a spokesman said "provides substantially greater recoveries to all creditors of Energy Future than the proposed Berkshire transaction".

Sempra received financing commitments for the deal from RBC Capital Markets and Morgan Stanley, it said in its statement. We believe our agreement with Energy Future will help ensure that Texas utility customers continue to receive the outstanding electric service they have come to expect from Oncor and provide stability to Oncor's almost 4,000 employees. Reuters reports Sempra seized an opening after EFH's main creditor Elliott Management Corp. criticized Berkshire Hathaway's bid for undervaluing Oncor. Hedge fund Elliott Management, which owns a significant portion of Oncor's debt, opposed Berkshire's takeover bid, saying it wasn't enough.

Sempra expects to close the sale in the first half of next year.

As part of the transaction, Sempra Energy has committed to support Oncor's plan to invest $7.5 billion over a five-year period to expand and reinforce its transmission and distribution network.

That turned out to be Sempra, which is based in San Diego and provides power to 32 million customers.

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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. A judge was scheduled to consider Berkshire's offer during a US bankruptcy court hearing in Wilmington, Delaware, on Monday.

Buffett's firm, which is known for not engaging in bidding wars, indicated last week that it would not be increasing its offer for Oncor.

In May 2016, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. Both saw pushback from consumer advocates - those concerned about the deals' impact on Oncor's financial health, independence and rates it charges - and failed to gain full approval from the state's Public Utility Commission. "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".

When the deal is completed, the Oncor Chief Executive Bob Shapard will become executive chairman of Oncor's board. Berkshire had offered US$9 billion, while Elliott had been working on a bid that may total US$9.3 billion.

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