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TXU Gets No Better Offers, Sticks with $32 Billion Private Equity Bid

Texas power company TXU Corp. said it would proceed with its planned buyout by a private equity group after failing to attract a superior offer.

TXU, which agreed in February to be bought for $32 billion by Kohlberg Kravis Robertsand Texas Pacific Group, said that during its 50-day "go-shop" period, in which it had the right to solicit other bids, that no superior offers were received.

The company indicated at the beginning of April, with about two weeks left to go in the "go-shop" period, that it did not expect to receive a superior proposal after having contacted 70 potential buyers.

But the possibility of another bid emerged last week when it was disclosed that a company affiliated with the powerful Dallas-based Hunt Oil wanted to buy the electric delivery business of TXU.

TXU said in the statement that it had signed confidentiality agreements with 10 companies, indicating that it had signed one additional agreement since its April 2 press release, when it said it saw no superior offers.

KKR and Texas Pacific have run up against difficult Texas politics in the time since the deal has been announced. The size of the transaction and widespread consumer anger about soaring electricity prices in the five-year-old competitive market led state lawmakers to scrutinize the proposal.

The buyers have promised to scale back TXU's controversial effort to build coal-fired plants. They have also promised to reduced rates for some retail customers and have agreed to hold the TXU assets for at least five years.

When the deal was announced, many industry analysts and experts said it would be tough for a competitor to launch a rival bid because the deal is so big -- it is the largest leveraged buyout ever -- the difficulty of financing the deal, and the head start KKR and Texas Pacific had with environmentalists.

In the weeks since the deal, the stock has traded below the $69.25 per share offer price, an indication that investors were not expecting a higher offer. Shares were up in New York Stock Exchange trading.

During the go-shop period, which ended on April 16, the deal called for a break-up fee of $375 million. After that, the termination fee rose to $1 billion.