Warren Buffet’s Berkshire Hathaway Inc. was dealt a big blow when Oncor declined its offer. The power transmission company finally sealed a deal with Sempra Energy who offered $9.45 billion in an all cash transaction.
Buffet, who usually avoids bid wars, began working a few months back to acquire Oncor after regulators from Texas had stopped Energy Future from selling Oncor on two previous occasions.
Energy Future has been in bankruptcy since 2014. Because of this, it approached the court to seek permission to sell Oncor to Berkshire Hathaway for $9 billion, but it faced severe opposition from its primary creditor Elliot Management Corp., who was against the selling of Oncor. However, the company decided to go a different route when it was approached by Sempra Energy for a buyout of $9.45 billion.
After the completion of the transaction, which is assumed to be around $18.8 billion including debt, Sempra Energy will hold 60 percent of the restructured Oncor. Even though Energy Future holds 80 percent of Oncor, after the transaction, Sempra will sell some of the equity to external investors. This information is based on sources who are close to the deal.
Because of this new development, shares of Sempra spiked by 1.2 percent and reached $117.79 per share, after hitting an all-time high of $118.78. This deal will add 10 million Oncor customers in Texas to Sempra and it will increase the earnings from the following year.
Analyst Timothy Winter from Gabelli & Co, who has been following this transaction, said: “They get to own 60 percent interest in a quality, growing Texas distribution utility. It’s a way for them to grow in a low-risk manner.”
Another analyst, Andrew Bischof from Morningstar, commented that this transaction indicates a consolidation that is happening in the utilities sector.