Sempra Energy versus Warren Buffet in battle for Oncor
SAN DIEGO (KUSI) — San Diego’s Sempra Energy went head to head with Warren Buffet, America’s pre-eminent deal maker, but won the bidding war to acquire a Texas energy company. Sempra has to pay a heavy price for it though – $18.8 billion.
Simply competing with Warren Buffet has a certain notoriety, and winning made Sempra front page news in the business press.
Sempra offered $9.45 billion for Texas-based Oncor, a profit making energy transmission company, and another over $9 billion for Oncor’s parent company, Energy Future, which is heavily in debt and in bankruptcy.
Buffet had a deal to purchase Oncor "only" for $9 billion which didn’t help Energy Future’s creditors and the deal fell apart.
Meantime, Sempra was working behind the scenes to purchase Oncor and assume that debt. The creditors got on board.
SDSU finance professor, Nik Varalya, is not surprised Buffet backed off because he’s always adhered to what’s called a "Walk-away price."
Does this mean Sempra paid too much? Not necessarily. This purchase for Sempra broadens its reach into the southwest. Texas is becoming a big renewable energy state and Oncor gives it transmission capacity.
Sempra also adds another $10 million to its customer base of 32 million. So how much is this $18.8 billion going to be paid for? We know half will be in cash.
The stock market indicates this is a good deal, at least for Sempra stockholders. It’s stock value went up $1.85 to $118.40.
This is one of the biggest deals made by a San Diego based company and the largest ever for Sempra.