Elliott Girds for Battle With Buffett in Texas Utility Bid

Updated on
  • Hedge fund says Berkshire deal doesn’t maximize creditor value
  • Elliott is largest creditor to Oncor’s bankrupt parent company

Berkshire After Buffett

Billionaire Paul Singer’s Elliott Management Corp. is promising a lengthy takeover battle if Warren Buffett doesn’t improve the terms of his offer for Oncor Electric Delivery Co.

The hedge fund said a bid by Buffett’s Berkshire Hathaway Inc. for Oncor Electric fails to maximize value for creditors, according to a July 5 letter released Monday. Elliott, the largest creditor to Oncor’s bankrupt parent, Energy Future Holdings Corp., is pushing the Texas utility to allow for alternate proposals with better valuations.

Elliott published some documents together with the letter, which was sent to Energy Future just days before Berkshire Hathaway announced its Oncor deal. The hedge fund also urged the utility’s board to immediately bring Elliott into its negotiations regarding any alternatives, including talks on the deal with Berkshire to avoid “unnecessary litigation costs and expenses” and to help with confirmation of a plan of reorganization “upon which an alternative transaction rests.”

“While we are entirely supportive of a transaction with Berkshire or another third party in the event that the value provided by that transaction exceeds the value being proposed by Elliott, we fear that the Berkshire transaction does not provide such value,” Elliott said in its letter.

The energy unit of Berkshire Hathaway on Friday became the third company to try to buy Oncor, a takeover that’s key to ending the bankruptcy of Energy Future, which began in April 2014. Earlier this year, Texas regulators rejected NextEra Energy Inc.’s $18.4 billion bid to buy Oncor for a third time. Last year, it quashed an offer from Hunt Consolidated Inc.

Elliott values Oncor at approximately $18.5 billion and the reorganized parent entity at $9.3 billion, according to the letter. Berkshire announced July 7 that it would buy Oncor in a deal said to be valued at about $17.5 billion.

(Updates with details on Elliott’s plan starting in third paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE