Berkshire Hathaway makes $9bn all-cash offer for Texas utility company

Warren Buffett’s Berkshire Hathaway Inc said on Friday it would pay $9 billion to pick up the parent of Texas power transmission company Oncor Electric Delivery Co from bankruptcy, stepping up its pursuit of steady returns in utilities.

If the all-cash deal is approved by a bankruptcy judge and Texas regulators, it will hand Berkshire ownership of one of the largest US electricity transmission companies. Texas regulators shot down two previous deals to sell Oncor to other companies.

The deal also highlights the prominence of Greg Abel, 55, Berkshire Hathaway Energy’s chief executive. Investors consider him a top candidate to succeed Buffett, 86, at the Omaha, Nebraska-based parent company’s helm.

Buffett and Abel did not respond to requests for interviews.

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Dallas-based Oncor delivers power to more than 3.4 million homes and business through roughly 122,000 miles (196,000 km) of transmission and distribution lines. It is 80 percent owned by Energy Future Holdings, which Berkshire has now agreed to acquire.

Oncor posted $431 million of profit in 2016, and similar sums in the prior three years.

Buffett values such consistency, telling Berkshire shareholders in February that utilities generate “recession-resistant” earnings because they offer an “essential service” that generates “remarkably steady” demand.

Berkshire Hathaway Energy typically generates nearly 10 percent of its parent’s profit, contributing $2.29 billion to an overall $24.07 billion in 2016.

Oncor’s takeover requires approval by Texas’ Public Utility Commission (PUCT), which in 2016 and 2017 scuttled bids by NextEra Energy Inc and privately held Hunt Consolidated Inc.

Regulators had asked for Oncor to be ringfenced so that it does not assume new debt from its acquirer and does not pay out too much cash as dividends.

Berkshire expects Friday’s purchase to close in the fourth quarter. It said the transaction implies an equity value of about $11.25 billion for Oncor.

- Reuters