Sempra beats out Warren Buffett in battle to acquire Texas transmission company

Sempra beats out Warren Buffett in battle to acquire Texas transmission company

Sempra Energy (SRE) agreed to buy Texan power distributor Oncor Electric Delivery and its bankrupt parent Energy Future Holdings for an enterprise value of about $18.8 billion, bursting in on Berkshire Hathaway's (BRK.A) (BRK.B) 's $18.1 billion offer.

Sempra Energy would pay $9.45 billion in cash for Dallas-based Oncor and assume its debt, making the deal worth about $18.8 billion.

According to Reuters, the board at Energy Future opted for the Sempra bid after receiving assurances from Sempra officials that its offer for Oncor would received approval from the Public Utility Commission of Texas, as well as a US bankruptcy judge.

In mid-July, Berkshire Hathaway had made a bid for Energy Future Holdings for $9 billion in cash, but on Wednesday the Wall Street Journal reported that hedge fund Elliott Management had acquired a particular class of debt that would allow it to block Berkshire's purchase of the company.

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Officials at Sempra, Oncor and Berkshire Hathaway did not respond to requests for comment Sunday night but the deal is expected to be announced Monday. Sempra has about 32 million customers in the U.S. and Mexico and employs about 16,000.

Sempra Energy said it would also commit $7.5 billion over five years to expand and reinforce Oncor's transmission and distribution network.

The proposed merger would need the sign-off of the DE judge overseeing Energy Future Holdings' bankruptcy, along with approvals from the Public Utility Commission of Texas and federal regulators.

Sempra received financing commitments for the deal from RBC Capital Markets and Morgan Stanley, it said in its statement. Hedge fund Elliott Management, which owns a significant portion of Oncor's debt, opposed Berkshire's takeover bid, saying it wasn't enough. Buffett is known for avoiding bidding wars. Many of these factors are outside the control of Berkshire Hathaway Energy Company and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. The deal is expected to close in the first half of next year.

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Earlier this year, Texas utility regulators quashed an offer from NextEra Energy Inc., valued at $18.4 billion including debt, after the utility giant refused to establish ring-fencing measures to protect Oncor's credit. Both will serve on Oncor's board.

Sempra plans to maintain the existing independence of Oncor's board, which has protected the electricity company and its customers during the ongoing EFH bankruptcy that has dragged on for three years. Evercore Partners Inc is the financial adviser to Energy Future, and Kirkland & Ellis LLP is its legal adviser. To gain possession of Oncor, Sempra will acquire the reorganized Energy Future Holdings Corp. Oncor's general counsel, Allen Nye, will become Oncor's CEO.

The Texas Tribune provided this story.

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