Just days after Warren Buffett said he wouldn’t go higher than $9 billion to take over bankrupt Texas utility Oncor, Sempra Energy has upped the ante with a $9.45 billion bid.
Sempra Energy—a U.S. utility owner—has agreed to buy Oncor Electric Delivery Co.—a Texas power distributor—for $45 billion more than Buffett’s Berkshire Hathaway Inc.
Oncor’s parent company is Energy Future Holdings Corp., which is already 80 percent owned by Sempra and which filed for Chapter 11 restructuring earlier this year.
The Sempra deal for Oncor is valued at some $18.8 billion when you round in the debt it would be taking on, media cited a Sempra company statement as saying from 20 August.
According to media reports, Energy Future Holdings has spent more than three years trying to restructure some $50 billion in debt, and a finalized takeover deal is the only way out of bankruptcy.
Reuters describes Sempra’s bid as a “rare blow for Buffett, who avoids bidding wars for companies”.
Last week, Buffett had made it clear that Berkshire Hathaway would not go any higher than $9 billion for the utility, even as Elliott Management, the largest creditor of Oncor’s parent company, offered US$9.3 billion.
Elliott had opposed the Berkshire bid, which is said undervalued Oncor.
“We appreciate the continued opportunity to collaborate with many stakeholder groups in Texas and thank them for their outstanding support, which sets our offer apart from any other bid,” Greg Abel, Berkshire Hathaway Energy chairman and CEO, said in a statement last week.
In an email to Reuters, an Elliott spokesman said the company would support the Sempra bid for Oncor: "Elliott is supportive of the proposed Sempra transaction, which provides substantially greater recoveries to all creditors of Energy Future than the proposed Berkshire transaction."
By Damir Kaletovic for Oilprice.com
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Damir Kaletovic is a veteran investigative journalist covering Europe and the Middle East, and a senior consultant for Divergente Research.