Look below the surface of the $45b takeout of TXU and what do you see? A long list of concessions to help the deal sail through. But to find who really wins from these concessions, look a little deeper.
Kohlberg Kravis Roberts and Texas Pacific, along with Goldman Sachs, have delivered a deal in which TXU shareholders, customers and the community wins. TXU stock holders get a 25% premium to the average closing share price over 20 days ending February 22. Customers get a 10% price decrease and price protection through September 2008. And, the community gets environmental benefits-- planned coal-fueled generation units are reduced from 11 to 3, and the consortium pledges to increase its commitment to investing in alternative energy technologies.
But the real winner of all of these benevolent actions is private equity itself. In a year in which the Department of Justice has set its sights on the industry, investigating possible collusion in club deals, this is a public relations coup. Private equity has acknowledged that it may be regarded as "shadowy" as hedge funds. The two lead firms on the TXU deal, KKR and TPG, along with Carlyle and Blackstone, are creating the Private Equity Council, the industry's first trade group, charged with educating the public and lobbying government. After all, as private equity ramps up its acquisitions globally, it does not help that the average Joe out there thinks "Barbarians at the Gate" when he hears "LBO."
So, with TXU, everyone wins. And how big a victor private equity is - that will be seen the next time a firm runs into stumbling blocks on a mega-deal or with regulators.
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