TXU agrees to record $45 billion buyout

The board of TXU Corp, the Dallas-based energy company, has agreed to a $45 billion takeover by private equity firms Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs, the investment bank.

If not met with regulatory opposition, the deal will become the largest equity buyout in history.

Under the terms of the acquisition agreement, shareholders will be offered $69.25 per share at closing, which represents a 25 percent premium to the average closing share price over the 20 days ending February 22, 2007.

In an attempt to woo regulators suspicious of private equity’s potentially asset-stripping presence in the energy sector, the deal promises various consumer benefits. In particular, the consortium has promised a 10% price decrease leading to $300 million of annual savings for residential customers and price protection through September 2008.

The deal also attempts to give TXU an image overhaul and stifle recent controversy by promising a stronger environmental policy and a pledge to reduce emissions. KKR and TPG announced that eight of TXU’s 11 planned dirty pulverized coal-fired generation plants would be scrapped, and that the new company would invest $400 million in demand side management initiatives and annual carbon emission reductions.

“We have listened to the various TXU constituencies,” said Henry Kravis, founding partner of KKR. “As a result, we have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly company, and we plan to work with management to implement it.”

The company plans on establishing a sustainable energy advisory board and William Reilly, chairman of the World Wildlife Fund, is to join the main TXU board. Also joining as advisory chairman is former US secretary of state James Baker, who recently produced a report which heavily criticized BP for shortfalls in its US oil refinery management.

While the deal has won backing from environmental groups such as Environmental Defense and the Natural Resources Defense Council, it may hit possible state regulatory hurdles despite TXU General Counsel David Poole's assertion in a conference call that regulatory approval was not needed for the $45billion sale to be completed, despite the fact that both KKR and TPG have failed in previous utility takeovers in different states.

Nevertheless a conflict may arise between the deal’s supporters and the regulatory body if Texas commissioners perceive unreasonable costs being passed along to customers as a result of the deal. Critics contend that the deal may result in higher prices for consumers.

The deal is expected to close in the second half of 2007.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Chartis Energy50 2023

The latest iteration of Chartis' Energy50 2023 ranking and report considers the key issues in today’s energy space, and assesses the vendors operating within it

2021 brings big changes to the carbon market landscape

ZE PowerGroup Inc. explores how newly launched emissions trading systems, recently established task forces, upcoming initiatives and the new US President, Joe Biden, and his administration can further the drive towards tackling the climate crisis

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here