(Bloomberg) -- PG&E Corp. rejected a $2.5 billion offer from San Francisco to buy the bankrupt utility giant’s wires within the city limits.
San Francisco’s offer significantly undervalues the company’s assets and a deal wouldn’t be in the best interests of its customers, PG&E Chief Executive Officer Bill Johnson said in a letter to San Francisco Mayor London Breed that was dated Oct. 7. He went on to say the company doesn’t need to sell its businesses to finance a restructuring and emerge from bankruptcy.
“We cannot accept your offer,” Johnson said in the letter. “If we ever do consider such sales, we have a duty to obtain the highest and best value for these assets.”
San Francisco has framed its takeover bid as a way for PG&E to raise money and help cover an estimated $30 billion in liabilities tied to devastating wildfires that its equipment ignited in 2017 and 2018. The damages from those blazes are what forced the company to enter the biggest utility bankruptcy in U.S. history in January. Now, the company has found itself competing with the likes of Pacific Investment Management Co. and activist investor Elliott Management Corp. over a restructuring plan.
PG&E has proposed a reorganization that would allow existing shareholders to preserve some of their stake in the company. The plan creditors led by Pimco and Elliott are pushing would all but wipe out current investors.
(Updates with restructuring plan in fourth paragraph)
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