Done by Midnight!: Berkshire Hathaway Buys Oncor

Berkshire Hathaway Energy reported it has executed a definitive merger agreement with Energy Future Holdings as part of the latter’s reorganization. The objective is acquiring Oncor, which serves millions of Texans with its 120,000 miles of transmission and distribution lines.

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A subsidiary of Warren Buffett’s investment empire has cut a deal to acquire Texas transmission firm Oncor Electric Delivery from bankrupt parent Energy Future Holdings, the companies announced early Friday.

Berkshire Hathaway Energy reported it has executed a definitive merger agreement with Energy Future Holdings as part of the latter’s reorganization. The objective is acquiring Oncor, which serves millions of Texans with its 120,000 miles of transmission and distribution lines.

Oncor, meanwhile, might finally find a buyer to free itself from the bankrupt EFH after scuttled attempts by Hunt Consolidated and NextEra Energy Inc. for $20 billion and $18 billion, respectively. Berkshire Hathaway Energy will pay about $9 billion in cash for the reorganized EFH with an implied equity value of $11.25 billion for 100 percent of Oncor, subject to closing conditions.

The acquisition should close in the fourth quarter. Berkshire Hathaway Energy is a subsidiary of Buffett’s Berkshire Hathaway Inc. and owns Mid American Energy and other utility interests.

“Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas-when we invest in Texas, we invest big,” Buffett said in a statement. “Oncor is a great company with similar values and outstanding assets.”

Oncor CEO Bob Shapard will retire and assume the role of executive chairman of the company’s board once the deal closes, while senior vice president and general counsel Allen Nye will be promoted to CEO.

“By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state,” Shapard said. “Being part of Berkshire Hathaway Energy is a great outcome for Oncor. Oncor will remain a locally managed Texas company headquartered in Dallas, committed to the communities we serve, and our customers will continue to receive the safe and reliable service they have come to expect from our dedicated team of employees.”

The Berkshire bid may have a significant rival in Elliott Management Co., one of the largest creditors in EFH's bankruptcy. Elliott is mulling a potential $18.5 billion bid, including debt, according to news reports Monday.

Two previous companies tried and failed in their bids to buy Oncor, which owns and operates one of the largest grid transmission networks in the country. Three years ago, Hunt Consolidated and partners offered to buy Oncor out of EFH’s bankruptcy proceedings, but that potentially $20 billion deal was scuttled partially due to reported resistance from Texas regulators.

Last year, Florida-based utility giant NextEra Energy made an $18 billion bid for Oncor. It was rejected twice by the Texas Public Utility Commission over concerns about debt leverage and potentially negative impact on ratepayers.

Buffett’s Berkshire Hathaway parent firm has made a move for utility interests in recent years. The holding company owns a vast, diverse mix of investments, from insurance companies to railroads, newspapers and food service, among many others.

The parent’s Texas presence already includes headquarters for BNSF Railway Co., Acme Brick Co., Justin Brands, Berkshire Hathaway Automotive, Star Furniture and others.

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