Berkshire Hathaway Energy, a division of Warren Buffett's Berkshire Hathaway Inc., (BRK.A) (BRK.B) , confirmed Friday that it will purchase Oncor Electric Delivery Co. LLC in a deal that values the bankrupt unit's equity at $11.25 billion.
Berkshire Hathaway Energy will pay $9 billion in cash to Oncor's parent, Energy Future Holdings Corp, a group that Buffett invested in, via a corporate bond, back in 2013, resulting in one of the Sage of Omaha's rare losses. The deal is expected to close by the end of the year, the companies said, pending approval from both regulators and bankruptcy courts.
"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."
If approved, the deal will close a rowdy battle for Oncor's assets, which at one point NextEra Energy Inc. was prepared to pay $18 billion for before being knocked back by the Public Utility Commission of Texas, which voted unanimously voted on April 13 to reject the deal as not being in the public interest. The transactions included NextEra's purchase of Energy Future Holding's Corp.'s 80% interest in Oncor for about $18.7 billion.
"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," said Oncor CEO Bob Shapard. "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 Dallas electricity producer filed for Chapter 11 protection on April 29, 2014, to implement a restructuring that was later scrapped. At the time, EFH's total debt was just under $42 billion.
EFH, formerly known as TXU Corp., was formed after a consortium of private equity firms, including Kohlberg Kravis Roberts & Co. LP (KKR), TPG Capital LP and Goldman, Sachs & Co., acquired the company for about $32 billion in equity on Oct. 10, 2007, assuming $13 billion in debt.
While Berkshire is primarily an insurance company, and Buffett himself is also known for small consumer stakes like Dairy Queen and See's Candies, here's a look at some of his big recent industrial plays.
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Berkshire's last major deal was also its single largest one ever. The company paid $37.2 billion in cash and debt for Precision Castparts Corp., an aerospace component manufacturer.
Last year, Berkshire took stakes in American Airlines Group Inc. (AAL) , Southwest Airlines Co. (LUV) , United Continental Holdings Inc. (UAL) and Delta Air Lines Inc. (DAL) , despite once calling the industry an investment "death trap."
The holding company, which reportedly is in talks to buy Oncor and is previously known as MidAmerican Energy Holdings Co., owns several utilities and energy businesses across the world. They include western electric power company PacifiCorp, acquired for $5.1 billion in 2005, and AltaLink LP, a Canadian electricity transmission provider acquired in 2014 for $2.7 billion.
Berkshire bought out the freight railroad network, which covers over 30,000 miles of track, in pieces, finally acquiring full ownership in 2009 in a deal valuing the full company at about $44 billion. Buffett said in a statement at the time that the deal represented "an all-in wager on the economic future of the United States. I love these bets."
When the Pritzker family, grappling with inheritance infighting following the death of patriarch Jay Pritzker, decided to sell its Marmon industrial holding firm, Buffett jumped in, acquiring a 60% stake in the company on Christmas Day 2007 for $4.5 billion. Marmon, which generated 2015 revenues of $8 billion, is a sprawling group of nearly 200 independent manufacturing businesses and 15 standalone businesses.
Ohio-based specialty chemical company Lubrizol Corp. was sold to Berkshire for nearly $10 billion in 2011. Buffett subsequently called the deal a "big mistake," as he'd been unaware that former director David Sokol bought a stake in Lubrizol before recommending Berkshire buy out the company. Berkshire subsequently said that Sokol violated Berkshire's insider trading policies.
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