8-KMaterial AgreementsOther EventsExhibits & Filings

SEMPRA 8-K Report, Material Agreement (Oct 6, 2017)

Filed October 6, 2017For Securities:SRESREA

Summary

This 8-K filing by Sempra Energy (SRE) on October 6, 2017, details significant amendments to their previously announced merger agreement concerning Energy Future Holdings (EFH) and its subsidiary Oncor. A key development is the Waiver Agreement, which eliminates the requirement for Sempra to secure debt financing for its merger subsidiary (Merger Sub) and removes the need for Hart-Scott-Rodino (HSR) antitrust clearance as a condition to closing the transaction. These changes streamline the merger process by removing specific financing and regulatory hurdles. Furthermore, Sempra has updated its financing plan for the approximately $9.45 billion merger consideration. Instead of the previously planned 60% ownership of EFH and raising external equity and debt for Merger Sub, Sempra now intends to own 100% of EFH post-merger. The funding strategy has shifted to Sempra raising approximately 65% of the consideration through the sale of Sempra's own equity and the remaining 35% through Sempra's debt issuances, all raised at the Sempra Energy corporate level. This update also includes an agreement to acquire certain minority interests in Oncor from current and former directors and officers. Overall, these amendments signal a move towards a simpler, more direct financing structure for Sempra and reduce potential complexities related to third-party equity investors and specific debt financing requirements for the merger subsidiary. The company has also filed joint applications with the Public Utility Commission of Texas (PUCT) and the Federal Energy Regulatory Commission (FERC) for approval.

Key Highlights

  • 1Sempra Energy and its merger subsidiary are no longer required or permitted to pursue debt financing for the merger, simplifying the funding structure.
  • 2The requirement for Hart-Scott-Rodino (HSR) antitrust clearance is removed as a condition for closing the merger.
  • 3Sempra Energy now plans to own 100% of EFH post-merger, a change from the previous 60% expectation.
  • 4The financing for the ~$9.45 billion merger consideration will be raised at the Sempra Energy corporate level: 65% from Sempra equity sales and 35% from Sempra debt issuances.
  • 5Sempra has agreed to acquire approximately $25.9 million worth of minority interests in Oncor from certain current and former directors and officers.
  • 6Joint applications for merger approval have been filed with the PUCT and FERC.
  • 7The Waiver Agreement aims to facilitate the merger by removing specific financing and regulatory conditions.

Frequently Asked Questions

The Waiver Agreement significantly simplifies the merger by removing the obligation for Sempra Energy to secure debt financing for its merger subsidiary (Merger Sub). It also eliminates the need for Hart-Scott-Rodino (HSR) antitrust clearance as a condition to closing the transaction, potentially speeding up the process.

Previously, Sempra expected to own about 60% of EFH and would have secured debt financing for its merger subsidiary. Now, Sempra intends to own 100% of EFH post-merger. The financing has shifted to Sempra Energy raising approximately 65% of the total $9.45 billion consideration through its own equity sales and the remaining 35% through its own debt issuances, rather than through Merger Sub.

The total merger consideration is approximately $9.45 billion. Under the updated plan, Sempra Energy will fund about 65% of this amount through the net proceeds from sales of its own equity and the remaining 35% from net proceeds of its own debt issuances. This funding will be raised at the Sempra Energy corporate level.

Yes, Sempra Energy has committed to provide approximately $25.9 million in cash, contemporaneous with the closing of the merger, to acquire the Class B Membership Interests in Oncor Management Investment LLC held by certain current and former directors and officers. This acquisition is not a condition for the merger to close.