Blackstone/Carlyle Team Mulls Rival TXU Bid

The Blackstone Group, together with The Carlyle Group and Riverstone Holdings, are mulling a rival offer for TXU , a source familiar with the situation said on Sunday, in a move which could upset a record-breaking $32 billion bid for the Texas power company from competing buyout shops.

The source said the talks between the private equity firms are in early stage. While the deal's "go-shop" period was expected to interest suitors, a counter-bid would face the scrutiny of environmental groups and politicians already grappling with the existing offer.

Blackstone and Carlyle declined to comment about a TXU counterbid. Riverstone and Carlyle are partners in the Carlyle/Riverstone Global Energy and Power Funds.

Dallas-based TXU, Texas's largest power company, agreed to be acquired by a private equity group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group last month in the largest leveraged buyout ever.

As part of the deal, TXU has until April 16 to solicit and consider other offers.

Hellman & Friedman was also part of the Carlyle and Blackstone team, the Financial Times reported, though the source who spoke to Reuters could not confirm this.

Blackstone has invested in the past with Hellman & Friedman, along with KKR and TPG in a consortium that bought power generating company Texas Genco in 2004. Hellman & Friedman declined to comment on Sunday.

TXU management has not signed future employment agreements with KKR and TPG, making them neutral to a new suitor. The deal also has a low break-up fee of $375 million if TXU accepts a superior offer before April 16. The termination fee rises to $1 billion after that time.

One potential hurdle for a new bidder is the challenge of raising funding, as many big Wall Street banks already are tied to the TXU deal, either as investors or advisers. Another factor is the complexity of navigating through political circles and environmental groups to get approvals that will satisfy shareholders, regulators and the local community.

KKR and TPG's deal values TXU at $69.25 a share. TXU's shares closed down 47 cents at $62.75 on Friday.