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Sempra Energy gazumps Warren Buffett with US$9.45bn deal for Oncor

22 August 2017, 01:14 | Melanie Burgess

CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha Nebraska U.S. on May

CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha Nebraska U.S. on May

Sempra Energy is nearing an agreement to buy Oncor Electric Delivery Co for about US$9.45 billion, according to a person familiar with the matter, putting it in line to scoop up the Texas utility also being pursued by Berkshire Hathaway Inc and Paul Singer's Elliott Management Corp.

San Diego-based energy services holding company said it will pay $9.45 billion in cash for the acquisition - - compared with the $9 billion on offer from Berkshire Hathaway.

Energy Future's board on Sunday favored Sempra's offer over Berkshire Hathaway $9 billion deal to buy Oncor, sources told Reuters, after Sempra also offered assurances it could get its acquisition of Oncor approved by Public Utility Commission of Texas, as well as a US bankruptcy judge.

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.

Among Sempra's holdings is San Diego Gas & Electric and Southern California Gas. 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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The company took part in a leverage buyout in 2007 and when energy prices started falling, the company's fortunes went downhill.The company filed for bankruptcy in April 2014, citing $40 billion in debt. Elliott previously attempted to put its own $9.3 billion bid together for Oncor, but has now told Reuters it is supportive of Sempra's bid. Buffett is known for shying away from bidding wars.

The deal may put an end to the escalating battle between Buffett and Singer and would be Sempra's largest acquisition since it was formed in 1998, based on data compiled by Bloomberg, expanding its USA utility territory beyond California. "With its strong management team and long, distinguished history as Texas' leading electric provider, Oncor is an excellent strategic fit for our portfolio of utility and energy infrastructure businesses". Both will serve on Oncor's board.

"It is important for Oncor to remain financially strong", said Reed, who expects the transaction to bring a "satisfactory resolution" to the bankruptcy case.

Sempra plans to maintain the existing independence of Oncor's board, which has protected the electricity company and its customers during the ongoing EFH bankruptcy that has dragged on for three years. Oncor's general counsel, Allen Nye, will become Oncor's CEO.

Claiming the deal will strengthen Oncor's underlying financial strength and credit ratings, Sempra said it is committed to supporting Oncor's $7.5 billion, five-year capital investment plan.



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