Buffett's Berkshire to buy Texas power transmitter Oncor for $9 billion

08 July, 2017, 00:29 | Author: Alicia Barber
  • Berkshire Hathaway Inc. (BRK.B) Stock Rating Lowered by Vetr Inc.

Oncor serves about 10 million people and is the biggest regulated utility in Texas.

The transaction is expected to close in Q4, subject to closing conditions.

Berkshire says it would acquire Oncor's bankrupt parent Dallas-based Energy Future Holdings (EFH) for $9bn in cash with "an equity value of $11.25bn". Texas power regulators have already blocked two takeover efforts for Oncor, most recently last week, when they denied a proposal by NextEra.

"Buffett views infrastructure bets as a good long-term investment", said Steven Check, president of Check Capital Management Inc in Costa Mesa, California, which invests $300 million of the $1.4 billion it oversees in Berkshire.

Mr. Buffett has been on a buying spree of late. The company continues to purchase regulated utilities as a way to boost its overall credit rating, and its energy unit contributed roughly 9.5% to its $24.07 billion in earnings previous year.

The deal by Berkshire was not a surprise to most analysts considering Berkshire was amongst those that were identified as leading bidders in 2016 for the utility.

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Berkshire Hathaway Energy owns electricity and natural gas utilities across the United States.

Energy Future was created from the Dollars 45 billion buyout in 2007 of the former TXU Corp by KKR & Co, TPG Capital Management and Goldman Sachs Group Inc's private equity arm. "Oncor is a great company with similar values and outstanding assets".

Then, this year, another bid by NextEra Energy was rejected - three times.

Under the terms of the proposed transaction, Oncor's chief executive, Bob Shapard, would become the business's executive chairman.

"We are excited to begin the regulatory approval process as this transaction has significant support across our key stakeholders", Nye said in a statement.

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