The hottest stock God meets vultures to compete fo

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"God of stocks" and "vultures" compete for control of American power enterprises

Abstract: anyway, we will wait and see who will win the rare battle of control between "God of stocks" and "vultures"

"stock god" Buffett and "vulture fund" Eliot (elliottmanagement) are at war! On July 7, Buffett's Berkshire ˙ Berkshire Hathaway launched the acquisition of Texas transmission company Oncor, which caused the opposition of Eliot, the largest creditor of the bankrupt parent company energyfutureholdings (EFH). Eliot joined Buffett - a battle for corporate control in the U.S. power market is about to begin

Buffett takes action to consolidate power business

on July 7, Berkshire ˙ Hathaway announced that it would invest $9billion to acquire Oncor, with a value of about $18billion including debt. If the acquisition is successful, it will be the third largest acquisition transaction in the company's history

oncor is the only remaining "Pearl" of EFH. It currently operates the 6th largest transmission and distribution system in the United States and the largest in Texas, providing power services to more than 3.4 million households and enterprises in 402 cities and 91 counties in Texas through about 196000 kilometers of transmission and distribution lines. The financial times pointed out that Berkshire ˙ Hathaway is expected to double its energy customers and increase its asset valuation through this acquisition, which also highlights that it will bring at least three positive signals: the importance of power industry to the development of the company

in fact, this is also Buffett's investment in EFH again. He "overweight" EFH at the beginning of 2014, but the latter announced bankruptcy protection in May that year, which made Buffett's additional $2billion "float". Nevertheless, he was still unwilling to give up and finally set his goal on onco's current R. "Wall Street" pointed out that Buffett bought Oncor at a price much lower than expected, although it is not enough to make up for the loss of that year, but if the acquisition is successful, it will be full of stamina

Buffett said, "Oncor is very suitable for Berkshire ˙ Hathaway is a company with relatively good value and assets in its class. We are looking forward to another long-term investment in Texas. "

the New York Times pointed out that Oncor can well meet Buffett's energy goals by implementing performance management. The latter has owned utility companies in Iowa, Nevada and Utah. In 2016, Berkshire ˙ Hathaway energy contributed 9.5% to the parent company's net profit of US $24.07 billion

Berkshire ˙ Gregabel, chairman, President and CEO of Hathaway energy, said, "this acquisition combines the advantages of the two companies. Our common goal is to provide excellent customer service and commit to investing in important infrastructure to make Texas' energy stronger and more reliable."

oncor is optimistic. Bobshapard, CEO of the company, said, "by Berkshire ˙ After Hathaway is incorporated into its group, we will gain more and richer operating experience and financial sources, which will be beneficial to the future development of Oncor. "

it is preliminarily expected that the acquisition will be completed in the fourth quarter, but it still needs the approval of Texas regulators, US federal regulators and the bankruptcy court

Eliot "stepped in" to fight for control

Buffett's acquisition of Oncor attracted the attention of EFH creditors, of which Eliot, the largest creditor, was the most opposed and announced to join the battle for control. In fact, EFH creditors have been arguing about how to distribute the profits of this utility company

Reuters reported on July 10 that Eliot launched an acquisition of Oncor, with a purchase price of $18.5 billion, including debt. Eliot said in a statement that bafett's purchase price of about $18billion was insufficient to compensate some creditors, and the company decided to launch an acquisition, which could provide higher interest for the stability of creditors

it is reported that Eliot may seek to convert its debt in EFH into equity and seek external equity partners to finance the transaction. Eliot owns 80% of the shares of EFH, and the remaining 20% of the shares are held by Borealis, an infrastructure subsidiary of Ontario workers' Pension Fund (omers), Canada, and Singapore sovereign wealth fund Singapore Government Investment Corporation (GIC). At present, the attitude of minority shareholders is unknown

Bloomberg pointed out that if Buffett buys Oncor, he is expected to become the second lien debt holder of EFH, which will directly impact Eliot's position and force the latter to fight back. At present, Eliot holds $2.9 billion of EFH guaranteed and unsecured debt, which is enough to "shut Buffett out"

although Eliot's acquisition conditions are better than Buffett's, it may not be favored by regulators and bankruptcy courts. After all, nexteraenergy, an American wind power company that spent $18.4 billion trying to acquire Oncor, has "lost its halberd". In July last year, nexteraenergy's acquisition of Oncor was rejected by Texas regulators on the grounds that it was "not in the public interest"

although Buffett needs to seek the permission of regulators and bankruptcy court without Eliot's support, and the purchase price of $9billion is not high, it is enough to please these auditors. In fact, Buffett has a greater chance of winning than Elliott. The advantage of the former lies in its accurate investment vision. Regulators and bankruptcy courts are more confident that the power utility company with development potential but in the quagmire of bankruptcy will be managed by strategic investors such as Buffett

in addition, Berkshire ˙ Hathaway promised to "eliminate all debts" once the acquisition was completed. Unlike nexteraenergy's "rectification and integration" of Oncor, Buffett not only reduced the purchase price, but also said that he would maintain the business stability of Oncor, which means that any financial problems will not affect Oncor's customers

on the contrary, although Eliot has the "hard power" of EFH's largest creditor, its past investment record is difficult to win the favor of regulators. The company has been buying shares of companies with undervalued market value, and then controlling the development of the company and making profits through absolute control. However, as a state public utility company, Oncor should not only achieve economic benefits, but also meet the social and public benefits, and not blindly pursue profits. Therefore, Eliot hopes that through Oncor's ambition of "taking a share" in the power industry, it is difficult for it to be approved smoothly

in any case, we will wait and see who will win the rare battle of control between "stock god" and "vulture"

Copyright © 2011 JIN SHI