Biggest-ever leverage buyout for Texan power producer

26 February 2007

Private equity companies Kohlberg Kravis Roberts (KKR) and Texas Pacific Group (TPG) have agreed a joint purchase of Texan power producer TXU in the largest-ever leverage buyout, according to reports.

The $44 billion sale surpasses the $39 billion that Blackstone Group paid for Equity Office Properties Trust earlier this month, with the two equity firms reportedly agreeing to pay between $69 to $70 per TXU share.

The deal was apparently facilitated by KKR and TPG's decision to agree to scale down TXU's $10 billion scheme to construct 11 new power plants, which has attracted widespread opprobrium from environmental groups concerned that the coal-fired plants would massively increase the state's greenhouse gas emissions.

After negotiations last weekend, KKR agreed to build only three of the proposed plants and to stymie proposals set forward for further plants outside the state's boundaries.

William Reilly, a former Environmental Protection Agency member and an advisor to TXU on the deal, told the Los Angeles Times: "The cooperation between the environmentalists and the investors has led us to expect a future that will be collaborative and history-making."

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