Sempra to Gain Control of Largest Texas Utility in $9.45 Billion Deal

Buffett and Anka

Sempra Energy's Oncor offer bested the $9 billion in cash Berkshire Hathaway put forward before facing resistance from creditors in bankruptcy court. The Dallas-based Oncor holding company, formerly TXU Corp., at the the time struck agreements with key stakeholders to cut about $40 billion in debt, lower interest expenses, access additional capital "and create a sustainable capital structure for the future".

Headquartered in Dallas, Oncor is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas.

The Berkshire agreement had been opposed by Energy Futures investor Elliott Management, which is led by billionaire Paul Singer.

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", according to Berkshire.

If approved, the acquisition would be a massive one for Sempra Energy, which has a market value of about $30 billion. The conglomerate, which filed for Chapter 11 bankruptcy in 2014, is saddled with about $50 billion in debt.

Texas utility regulators this year quashed a NextEra Energy Inc. offer valued at $18.4 billion including debt, after the utility giant refused to accept measures to protect Oncor's credit.

That turned out to be Sempra, which is based in San Diego and provides power to 32 million customers.


A bankruptcy judge and Texas regulators would need to sign off on the SRE takeover; BRK's deal was scheduled to go before the judge in DE on Monday. But Berkshire Hathaway stood firm on its offer, saying last week that it would not be increasing the bid.

Dallas-based Oncor serves nearly 10 million customers and operates more than 170,590 kilometres of distribution lines. Previously, in April Texas regulators rejected a proposed $18 billion sale of Oncor to NextEra Energy Inc.

The transaction of the largest power distribution/transmission system in Texas should be accretive beginning next year, Sempra officials said.

Sempra said that as part of the deal, Oncor CEO Bob Shapard will become executive chairman of the Oncor board.

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. Allen Nye, now Oncor's general counsel, will succeed Shapard as Oncor 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. Berkshire Hathaway's class-B shares edged up 0.3%.

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