Sempra Energy talks $1.5 billion mandatory convertible preferreds at 6% to 6.5%, up 17.5% to 22.5%

By Abigail W. Adams

Portland, Me., Jan. 2 – Sempra Energy plans to price $1.5 billion of three-year series A mandatory convertible preferred stock after the market close on Thursday with price talk for a dividend of 6% to 6.5% and an initial conversion premium of 17.5% to 22.5%, according to a market source.

The deal carries a $225 million greenshoe.

Morgan Stanley, RBC Capital Markets, and Barclays are joint bookrunners for the registered offering, which is being made concurrently with an offering of $2.5 billion of common stock, according to a company release. The common stock offering carries a greenshoe of $375 million.

There will be a two-day book-building period for the offering, a market source said.

The convertible preferred stock will be priced at par of $100. The mandatory conversion date is expected to be Jan. 15, 2021.

Proceeds from the offerings will be used to help finance the pending acquisition of Energy Future Holdings Corp., which will include Energy Future Holdings Corp.’s indirect 80% ownership of Oncor Electric Delivery Company LLC.

If the acquisition is not completed by Dec. 1, 2018, Sempra may choose to redeem the mandatory convertible preferred stock. The mandatory convertible preferred stock may be redeemed in cash, or cash and shares if Sempra stock exceeds the initial price for 10 consecutive trading days before the notice of redemption, according to the preliminary prospectus.

There is takeover protection.

Sempra is a San Diego-based electricity and natural gas utility and infrastructure company.

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