Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) announced a definitive merger agreement with Energy Future Holdings (EFH), a subsidiary of Vistra Energy Corp. (VST, Financial), for an “all-cash consideration” of $9 billion, according to an Oncor press release. Buffett and Charlie Munger (Trades, Portfolio)’s conglomerate will acquire the reorganized EFH, which would ultimately result in the acquisition of Dallas-based Oncor, an energy company serving approximately 10 million Texans.
Background and transaction details
Buffett announced that Oncor, “an excellent fit for Berkshire Hathaway,” will boost the conglomerate’s presence in Texas with “multiple headquarters,” including BNSF Railway Co., Acme Brick Co., Justin Brands Inc. and McLane Co.
“We are pleased to make another long-term investment in Texas; when we invest in Texas, we invest big!” Buffett said.
Berkshire Energy CEO Greg Abel and Oncor CEO Bob Shapard both expressed gratitude toward the partnership. According to Abel, the “Berkshire Energy-Oncor” partnership will combine the strength of two companies that share common goals including “exceptional customer service” and a commitment to boost the Texas energy grid through “investments in critical infrastructure.”
Shapard, who will become executive chairman of Oncor following the merger completion, said that the Berkshire Energy partnership allows Oncor to “support the evolving energy needs of the state” through strategic operational and financial resources. Oncor’s CEO also said that the company will remain a locally managed company headquartered in Dallas and “committed to the communities [Oncor] serves.”
According to the press release, the all-cash transaction implies an “equity value of about $11.25 billion for 100% of Oncor.” The transaction is expected to close during the fourth quarter subject to closing conditions, including the required state, federal and bankruptcy court approvals. Allen Nye, the new CEO after the merger, expressed excitement for the regulatory approval process as the transaction “has significant support across [Oncor’s] key stakeholders,” according to the press release. Nye expects the merger to offer “a great outcome for Texas” and Oncor’s shareholders.
Disclosure: The author has no postions in the stocks mentioned.
