Sempra beats out Warren Buffett in battle to acquire Texas transmission company
Sempra Energy will buy the company Warren Buffett sought, Oncor, for $9.5 billion in cash.
Sempra Energy is about to wrap up a mega-deal to acquire a power transmission company located in Dallas, and the San Diego-based Fortune 500 company seems to have beat out Warren Buffet in the process.
Multiple sources reported Sunday evening that Sempra’s $9.45 billion offer for Oncor Electric has been accepted by Energy Future Holdings, a bankrupt Texas utility that is the parent company of Oncor.
The $9.45 billion price tag exceeds a $9 billion offer by Warren Buffet’s Berkshire Hathaway Inc., which made the offer two months ago.
Buffett is famous for refusing to take part in bidding wars and the Wall Street Journal reported Sunday that Sempra had sweetened its initial bid of $9.3 billion for Oncor.
Officials at Sempra, Oncor and Berkshire Hathaway did not respond to requests for comment Sunday night but the deal is expected to be announced Monday.
According to Reuters, the board at Energy Future opted for the Sempra bid after receiving assurances from Sempra officials that its offer for Oncor would receive approval from the Public Utility Commission of Texas, as well as a U.S. bankruptcy judge.
Elliott Management Corp., a hedge fund, is Energy Future’s biggest creditor and has indicated it will sign off on Sempra’s offer, according to sources cited by Reuters.
Elliott Management had resisted Berkshire Hathaway’s offer, claiming it was too low.
Sempra is now the fourth party to make an offer for Oncor, a transmission company that delivers power to more than 3.4 million homes and businesses, with transmission and distribution lines cover about 122,000 miles.
Two other offers prior to Berkshire Hathaway had been blocked by regulators in Texas.
If approved, the acquisition would be a massive one for Sempra Energy, which has a market value of about $30 billion. Among Sempra’s holdings is San Diego Gas & Electric and Southern California Gas.
Energy Future Holdings, which had previously been known as TXU Corp, ran into severe financial trouble in recent years.
The company took part in a leveraged 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.
Despite Energy Future’s problems, Oncor is considered a good investment by many, including Buffett. In 2016, Oncor posted $431 million of profit and earned similar returns in three years prior.
Business
rob.nikolewski@sduniontribune.com
(619) 293-1251 Twitter: @robnikolewski
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