Published: Tue, August 22, 2017
Money | By Charlene Sutton

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

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

The $9.45 billion cash deal to acquire Energy Future and its ownership in Oncor includes Sempra's assumption of Oncor's debt, making the total value of the transaction $18.8 billion.

Sempra Energy's Oncor offer bested the $9 billion in cash Berkshire Hathaway put forward before facing resistance from creditors in bankruptcy court. Representatives for Sempra, Oncor and Elliott declined to comment.

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.

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

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San Diego-based Sempra is the mystery bidder that was mentioned at an Aug 18 bankruptcy hearing, according to people familiar with the matter. Sempra said it has received financing commitments from RBC Capital Markets and Morgan Stanley, with Sempra expected to hold about 60% of the reorganized company.

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

Just six weeks ago, Berkshire struck a deal to buy Oncor for $9 billion.

Sempra Energy is venturing where other companies have stumbled. 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.

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In May 2016, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. Sempra is comfortable with conditions that Berkshire Hathaway has already agreed to, including ringfencing measures to protect Oncor's credit rating and preserve control of its board, that are seen as key to winning the support of Texas regulators, the person said.

Judge Christopher Sontchi told the bankruptcy court on Monday that the new bid was a "big change" that would clearly benefit Energy Future and its creditors.

If Sempra Energy closes the deal, Bob Shapard, Oncor's CEO, would become executive chairman of the Oncor's board of directors. Oncor's general counsel, Allen Nye, will become Oncor's CEO.

"It is important for Oncor to remain financially strong", said Reed, who expects the transaction to bring a "satisfactory resolution" to the bankruptcy case. Oncor is a division of bankrupt Energy Future Holdings Corp.

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