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

Buffett and Anka

Reports: Sempra Energy to buy Oncor for $9.45B, beating Buffett

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. 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 US utility territory beyond California. A deal would be Sempra's largest since at least 1997, according to data compiled by Bloomberg, and expand the company's USA utility territory beyond California. The enterprise value of the deal is around $18.8 billion, Sempra said. Sempra shareholders would own roughly 60 percent of the reorganized company following the transaction.

Lazard Ltd and Morgan Stanley are financial advisers to Sempra, and White & Case LLP is its legal adviser. But Berkshire is entitled to receive a $270 million termination fee that was negotiated.

The deal is subject to approvals from Texas utility regulators as well as a bankruptcy court overseeing the three-year old EFH proceeding, one of the largest bankruptcies ever. Berkshire had said that it wouldn't raise its bid and was prepared to walk away.

Others have tried and failed to take over the Texas utility, which serves nearly 10 million customers and operates more than 106,000 miles of distribution lines.

In May 2016, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. A group led by Hunt Consolidated dropped a bid a year ago after the state imposed conditions it found too onerous.

The energy company said in a statement when announcing the deal that it "will maintain the existing independence of Oncor's board of directors, which has protected Oncor and its customers during the ongoing Energy Future bankruptcy". "And we've already seen two fail in this situation".

The company runs power and gas utilities in Southern California, Chile and Peru reach to over 32 million customers.

Sempra has spent more than a decade building its gas portfolio, including liquefied natural gas export facilities, pipeline growth projects and a sizable and early plunge into Mexico.

In response to the Sempra bid, Berkshire Hathaway CEO Greg Abel said he was disappointed, but said the company still would be looking for opportunities.

Through the agreed upon 47 regulatory commitments, Texas stakeholders have rightly focused on protecting Oncor from unnecessary risk, including having no debt at intermediate holding companies.

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