Warren Buffett's Berkshire Hathaway and Paul Singer's Elliott Management both have eyes for Oncor, the largest electric utility in Texas, and CEO Bob Shapard has a sound process for deciding who will win in the bidding battle for his bankrupt company.
"You start with the current bid. Berkshire Hathaway's a great fit for us, and they'd be very supportive of our investment strategy," he told "Mad Money" host Jim Cramer on Monday.
On Friday, Buffett's investment company made a $9 billion offer for Oncor's parent, Energy Future Holdings, valuing it at $18.1 billion.
"So in the eyes of Berkshire Hathaway, strong business, strong cash flows, [and a] real good investment opportunity makes us a great fit for Warren Buffett," Shapard told Cramer.
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Elliott Management, Oncor's largest creditor, said Monday that it is considering a $9.3 billion counteroffer that would value the company at $18.5 billion.
For now, Shapard responded with reasonable caution to the reports of Elliott's proposal.
"At this point, it's just a conceptual deal," the CEO said. "We've not seen any specifics from Elliott. So they're fine people, but all I know is what's in front of us is Buffett. So the Berkshire Hathaway deal would be great for this company, I just don't know enough about Elliott yet to know what we have there."
Moreover, Shapard said that unlike NextEra Energy, which tried and failed to acquire Oncor for $18 billion, Berkshire checked all the boxes when building a bid for the utility.
"They went to Austin, said, 'We think you've got it right. The ring fence protected the company all these years. We'll accept it. We'll even expand it.' And they worked out a deal with the [Public Utilities Commission] staff, the Industrial Coalition, the Municipal Coalition and the Office of Public Utility Counsel, the main four interveners, and they cut a deal. And so they said, 'We'll take your ring fence, Texas,'" the CEO said, referring to a protective tactic the state used to transfer Oncor's risky assets to safer holdings.
Buffett is known to dislike bidding wars, but Shapard confirmed that the competition ensuing between Berkshire and Elliott seems more or less amicable.
"Elliott made it clear that they're happy to work with Berkshire Hathaway. They want to make sure they get the best value they can from Berkshire Hathaway," the CEO said.
In a letter to Oncor's parent company, Elliott said it would support a bid from Berkshire or a third party if it was higher than its own $9.3 billion offer.
"Whether Berkshire Hathaway is willing to change their bid or not, that's Berkshire Hathaway's decision," Shapard said.
And as Elliott considers its bid, Shapard made clear that it was unlikely any company would be able to acquire his privately-held utility without jumping through the Texas government's hoops.
"You have to come in and do what Berkshire did and say, 'We'll accept the conditions existing in Texas State,'" he told Cramer. "You have to go to Texas first, then to the debtor, then to the bankruptcy court because not only is value important, [but so is] closability, and quickly. This bankruptcy has been so long and so expensive. [With] the cash burned, we can't drag this thing out much longer."
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