Utility buyout could set record

Rocky Wire Services

Published February 27, 2007 at midnight

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An investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group on Monday offered $45 billion for TXU Corp., Texas' largest utility.

If federal regulators and TXU shareholders approve the deal, it would be the largest leveraged buyout in history.

The move came the same day the London-based Sunday Express reported that Midland, Mich.-based Dow Chemical, the largest U.S. chemical maker, may receive a takeover offer worth as much as $54 billion from private equity investors - including Kohlberg Kravis Roberts & Co. - in the next few weeks.

The Financial Times reported last month that buyout firms might bid for some Dow assets.

"You have a large number of significant companies, it seems like on an almost daily basis, being acquired at premiums," said Dean Gulis, who helps manage $2.4 billion at Loomis Sayles & Co. in Bloomfield Hills, Mich.

"That's one of the reasons we've seen such a generally strong market."

In the TXU deal, the buyers promised to cut electric rates by 10 percent, saving residential customers $300 million per year, and freeze those prices until September 2008.

They also extended an olive branch to environmentalists by agreeing to drop plans for eight of 11 proposed new coal-burning power plants and make other green concessions.

While some environmentalists and civic leaders hailed the decision to drop most of the coal plants, others vowed to keep fighting to block the company from building the three coal plants that the buyers wanted to keep.

TXU serves 2.3 million customers, mostly in the Dallas-Fort Worth area, and competes against other power producers in the deregulated Texas electric market as far afield as Houston.

TXU Corp.

TXU: NYSE

$67.93

+ $7.91

Dow Chemical

DOW: NYSE

$44.99

+ $1.54

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