Sempra Joins Hunt Family With $1.28 Billion Texas Power Deal

(Bloomberg) -- Sempra Energy is joining forces with the Hunt family in Texas, becoming co-owners of a utility and buying a power-line trust they manage in a $1.28 billion deal.

Sempra’s Oncor unit will pay about $21 a share for InfraREIT Inc., which owns Texas power lines, substations and transmission towers, Sempra said Thursday in a statement. Sempra will also pay $98 million for a 50 percent stake in a holding company that will own Sharyland Utilities LP. The rest will be held by Hunter L. Hunt and other members of the family of Ray L. Hunt.

It’s the latest expansion into Texas by Sempra, which last week added two board members under pressure from activist investors. Sempra reached an agreement last month to review its businesses with billionaire investor Paul Singer’s Elliott Management Corp. and Bluescape Resources Co., which have called on Sempra to sell assets.

“The transaction we’re talking about is right in the wheelhouse of value creation and it’s something that we would expect them to be quite supportive of,” Sempra Chief Executive Officer Jeffrey Martin said in an interview. The utility owner was briefing key investors Thursday.

Ironically, Hunt Consolidated Inc., where Howard L. Hunt serves as co-president, was among a group of suitors that lost out to San Diego, California-based Sempra when Energy Future Holdings Corp. was forced to sell Oncor in a bankruptcy proceeding. Sempra beat out Warren Buffett’s Berkshire Hathaway Inc., NextEra Energy Inc. and a group backed by Hunt Consolidated.

Sempra Joins Hunt Family With $1.28 Billion Texas Power Deal

Elliott and Bluescape didn’t immediately respond to an an emailed request for comment.

InfraREIT rose 1.9 percent, to $21.02, at 2:58 p.m. in New York. Sempra was up 0.5 percent.

“Sempra has expressed an interest in continuing to add to their regulated-utility properties in the U.S.,” said Kit Konolige, an analyst at Bloomberg Intelligence. “This looks like it should further that goal. Geographically, it fits very well.”

Sharyland Utilities leases electricity transmission from InfraREIT, which was created by the Hunts and is managed by Hunt Utility Services. As part of the deal, InfraREIT will pay $40.5 million to end the management contract.

David Campbell, the chief executive officer of InfraREIT and president of Hunt Utility Services, was until 2014 the chief operating officer at Bluescape. He was also the CEO of Luminant, the competitive power generation subsidiary of Energy Futures Holding Corp., the former TXU Corp.

‘Improving’ Mix

Sempra expects to use the proceeds from pending asset sales to fund its capital contribution of about $1.025 billion to Oncor, excluding certain costs. The transaction by Oncor also includes InfraREIT’s outstanding debt, which was about $945 million as of June 30. Sempra and Oncor expect to close the deal in mid-2019.

“The transaction doesn’t appear to be anything that is negative,” said Shahriar Pourreza, an analyst at Guggenheim Securities LLC. “It’s a very low multiple they’re paying for this investment. They’re somewhat improving their mix.”

A previous generation of Hunts tried to corner the market in silver during the 1970s.

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