Bankruptcy fight over Oncor to test Buffett’s discipline
Warren Buffett takes pride in naming his price to buy a company, and not paying a nickel more. But the largest US natural gas distribution utility, an unyielding hedge fund, and a Delaware bankruptcy judge now present one of the biggest challenges to the billionaire’s legendary discipline.
The board of bankrupt Texas utility Energy Future Holdings will meet later on Sunday to decide whether to sell its crown jewel, power transmission company Oncor, to Buffett’s Berkshire Hathaway or accept an opposing bid from Sempra Energy, a person familiar with the confidential deliberations said on condition of anonymity.
The rival bid for Oncor was disclosed on Friday by Energy Future’s biggest creditor, billionaire Paul Singer’s hedge fund Elliott Management. The identity of the bidder was not publicly announced, but Bloomberg first reported on Saturday that Sempra was the mystery bidder, citing anonymous sources. Berkshire Hathaway Energy, Buffett’s energy unit, has offered $9 billion in cash for Oncor, while the rival bid is for $9.3 billion, a lawyer for Elliott said on Friday.
The gap is pocket change for Berkshire, but Buffett pledged last Wednesday not to raise his offer.
“Paying extra is not the way he does business,” said Jim Shanahan, a senior analyst at Edward Jones & Co with a “buy” rating on Berkshire. “He is willing to be patient and wait for opportunities. That’s what analysts expect, and that’s what investors expect.”
Berkshire did not respond to requests for comment, while Sempra and Elliott declined to comment.