TXU, the leading energy provider in Texas, has reportedly tentatively agreed to a $45 billion buyout that would not only be the largest private-equity deal in history. The deal would also feature an interesting twist in the story; the buyers have promised environmental groups they would cancel a slew of coal-fired power plants on the firm’s drawing boards. Directors of TXU have given a go-ahead to the deal with sweeping concessions for environmentalists and consumers. The deal however has not been announced officially yet.
The investment consortium of Texas Pacific, Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc. had offered around $33 billion and the assumption of more than $12 billion in debt. The deal would outshine the previous landmark of Blackstone Group’s buyout of Equity Office Properties for $39 billion this month. The deal is offering about $70 per share which can be translated as 17 percent premium on the closing price on Friday last week.
The deal would be certainly a historic one not only in terms of the huge amount involved in the deal but for the convergence of business decisions and environmental concerns that guided the ultimate transaction to be concluded. Since private equity firms are unregulated and traditionally they have given primary concern to their privacy.
As a matter of fact both the companies, Kohlberg Kravis and Texas Pacific, never wanted to become an arduous enemy of the environmental groups. The decision of reducing the coal plant initiative will also free up billions of dollars planned for spending. Now the company can use these additional funds for other projects or to help finance the transaction.
The environmental agreement was the idea of the potential buyers, which made it a condition of the acquisition.
