Elliott Moves to Block Berkshire's Oncor Bid; Buffett Stands Pat -- Update
August 16 2017 - 10:06PM
Dow Jones News
By Dana Mattioli and David Benoit
Hedge fund Elliott Management Corp. has purchased a slice of
debt that would ensure the hedge fund's ability to block Warren
Buffett's deal to buy power-transmission business Oncor, according
to people familiar with the matter.
Elliott has been acquiring debt of Energy Future Holdings Corp.,
which owns Oncor, in recent months. The fund already owned a major
position in the biggest block of debt and had argued it could block
any deal, but the purchase of a different class from Fidelity
Investments closes a potential loophole that Mr. Buffett's
Berkshire Hathaway Inc. could have used to force the deal, the
people said.
Berkshire, known for making acquisitions quickly and staying out
of bidding wars, said Wednesday it was standing pat and wouldn't
raise its more than $9 billion offer for Oncor. In a statement, the
company emphasized support it has gotten from Texas stakeholders,
saying it "sets our offer apart from any other bid." State
regulators had squashed prior deals for Oncor.
"We stand ready to deliver on and exceed the regulatory
commitments," said Greg Abel, the chief executive of Berkshire
Hathaway Energy, the unit buying Oncor. Mr. Abel is also considered
a leading candidate to succeed Mr. Buffett as CEO of Berkshire.
Elliott's newly acquired debt is in an impaired class of notes,
meaning it won't be paid fully in the restructuring, and its
approval is likely needed to get a deal done. Elliott now controls
all the impaired classes and has notified the court it won't
approve the Berkshire bid in its current form.
The move means the future of Berkshire's more than $9 billion
deal for Energy Future, which would give it possession of Oncor, is
teetering. In July, Berkshire Hathaway Energy struck the deal,
which would be worth more than $17.5 billion including debt.
Energy Future, formerly TXU, was the subject of the biggest
leveraged buyout on record in 2007. Laden with debt, Energy Future
filed for bankruptcy protection in 2014.
After the Berkshire deal was announced, Elliott publicly
criticized its price and started to assemble a consortium of its
own to restructure the company with a higher sale price. It is
unclear where those efforts stand.
On Monday, Energy Future is due in court to seek approval to
commit to selling Oncor to Berkshire Hathaway. The transaction
includes a $270 million breakup fee. Elliott has objected to that
fee, and asked the court to reject the Berkshire deal. In a court
filing Wednesday, lawyers for Berkshire said Elliott has shown no
proof it has committed financing for an alternative deal.
After that, Energy Future and Berkshire will have to seek
approval from Texas regulators that killed two earlier deals for
Oncor, and a chapter 11 plan must be approved by the bankruptcy
court. The confirmation hearing is set for October.
Berkshire is the third would-be buyer for Oncor. Energy Future
had been trying to sell its 80% stake in Oncor, but the regulators
stymied attempts at deals by Hunt Consolidated Inc. of Texas and
Florida's NextEra Energy Inc., leaving the company mired in
bankruptcy. NextEra Energy had agreed to buy Oncor last year.
Texas regulators said the Hunt-led deal included too much
financial engineering to suit them, while NextEra's deal was
rejected for insisting on overriding many of the protections that
prevented Energy Future from imposing excessive debt on Oncor, and
guaranteed the unit kept a separate board of directors.
--Peg Brickley contributed to this article
(END) Dow Jones Newswires
August 16, 2017 21:51 ET (01:51 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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