NEW YORK (MarketWatch) — TXU Corp., the biggest power utility in Texas, said Monday its board has agreed to a deal to be taken private by an investor group led by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs.
The deal carries a total value of $45 billion including taking on board about $13 billion in debt. If regulators approve the deal, it would be the biggest leveraged buyout in U.S. history.
TXU shares surged nearly 14% to an all-time high of $68.15 in early trade.
The Dallas utilities giant
said that as a privatized company, it will initiate a public benefit program that includes cutting prices to residential customers, price protection through 2008, stronger environmental policies, and new investments in alternative energy.
Under terms of the buyout agreement, all outstanding stock will be exchanged for $69.25 a share in cash. That represents a 15% premium to Friday’s closing price of $60.02, and it exceeds the stock’s all-time high of $67.21 reached in September 2006.
The deal is expected to close in the second half of 2007. In the meantime, TXU may solicit other bids from third parties through April 16.
The funding of the acquisition will not result in new debt at the utility business.
“This is a momentous event for our company in our long journey to transform TXU from a former integrated monopoly to high-performance businesses,” said C. John Wilder, TXU’s chairman and chief executive. “The long-term capital, expertise and resources of the investor group will allow us to increase our focus on reliability, lower prices, outstanding customer service and innovative products, and investments in long-term environmentally sound technology.”
The new TXU will cut prices to residential customers in its traditional service area by a total of 10%, with the aim of providing $300 million in annual savings.
Prices will be cut by 6% in about 30 days, and a further 4% reduction will occur after the deal closes. The prices will then be held through September 2008.
The new company also vowed to bolster its environmental policies by reducing its new coal capacity by 75%, saying this should cut annual carbon emissions by 56 million tons.
TXU said it planned to invest $400 million in conservation and energy-efficiency activities over the next five years.
After completion of the deal, the company’s activities will remain under the jurisdiction of the Public Utility Commission of Texas, the Nuclear Regulatory Commission and the Federal Energy Regulatory Commission.
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