Buffett Finds a Big Deal in Energy
Warren E. Buffett has made a big play to expand his energy empire by offering to buy Energy Future Holdings, the bankrupt Texas power giant.
His Berkshire Hathaway Energy has agreed to pay $9 billion for Energy Future, which would give him the company’s Oncor utilities arm.
The deal, which gives Oncor an implied equity value of $11.25 billion and an enterprise value of $18 billion, is the biggest takeover bid that Mr. Buffett has announced since buying Precision Castparts for $37 billion. And it would bolster a Berkshire unit that the billionaire has praised for generating consistent returns while requiring only routine reinvestment.
The acquisition would help to open a new chapter for Energy Future, which in its previous life as TXU was the subject of the biggest leveraged buyout on record. But the 2007 deal by Kohlberg Kravis Roberts, TPG and an arm of Goldman Sachs quickly soured during the credit crisis. The debt-ridden company filed for bankruptcy protection three years ago.
• The deal would expand the domain overseen by Gregory E. Abel, the head of Berkshire’s energy division. He is a top contender to replace Mr. Buffett as Berkshire’s chief executive.
• Mr. Buffett is no stranger to Energy Future. Berkshire bought $2 billion in Energy Future bonds, which it later sold for a $873 million loss. “That was a big mistake,” he later wrote in a letter to investors.