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Oncor strikes deal to acquire InfraREIT for $1.28B

Oncor Electric Delivery Co. LLC struck a deal to acquire InfraREIT Inc. for approximately $1.28 billion, or $21 per share, in a bid to expand its Texas regulated utility platform. The transaction includes InfraREIT's outstanding debt, which stood at $945 million as of June 30.

"As growth continues across Texas and new generation projects continue to come online, this acquisition positions us to make future investments in transmission infrastructure that will better serve the Electric Reliability Council of Texas market and our customers," Oncor CEO Allen Nye said in an Oct. 18 statement.

InfraREIT is engaged in owning and leasing rate-regulated electricity delivery infrastructure assets in Texas. It leases all of its regulated assets to affiliate Sharyland Utilities LP. As part of the transaction, Oncor parent Sempra Energy will acquire a 50% limited-partnership interest in Sharyland Utilities for approximately $98 million.

Sharyland Utilities is privately owned by Hunter Hunt and other family members of Ray Hunt. Ray Hunt is the chairman and Hunter Hunt is the co-CEO of Hunt Consolidated Inc., the largest shareholder of InfraREIT. Hunt Consolidated had earlier dropped plans to pursue a "going private" transaction for InfraREIT.

Oncor plans to fund its acquisition of InfraREIT with capital contributions proportionate to its ownership interests from Sempra and Texas Transmission Investment LLC. Sempra, in turn, expects to use proceeds from assets sales to fund its approximately $1.03 billion capital contribution to Oncor and the Sharyland deal.

The transaction requires approvals of the Public Utility Commission of Texas and the Federal Energy Regulatory Commission, among others, to move forward. The InfraREIT purchase also needs the approval of its shareholders and is subject to a "go-shop" provision that allows for competing bids.

Sempra and Oncor expect to close the transaction in mid-2019. Upon closing, Oncor will own and operate all of Sharyland Utilities' and Sharyland Distribution & Transmission Services LLC's existing electric transmission assets located in Central Texas, West Texas, and the Texas Panhandle and South Plains. Sharyland Utilities will continue as an independent transmission utility.

In connection with the transaction, Sempra affirmed its EPS guidance range of $5.70 to $6.30 for 2019, and $6.70 to $7.50 for 2020. Sempra Energy also updated its 2018 GAAP EPS guidance range to $2.83 to $3.44, primarily to reflect the estimated impact of asset sales announced in September. The company's adjusted EPS guidance range is unchanged at $5.30 to $5.80 for 2018.

Financial advisers for the transaction are Lazard for Sempra, Barclays for Oncor and Morgan Stanley for Hunt Consolidated. Legal advisers are White & Case LLP for Sempra, Vinson & Elkins LLP for Oncor, and Baker Botts for Sharyland Utilities and Hunt Consolidated.