Energy Firm Accepts $45 Billion Takeover

The board of TXU met last night to vote on the leveraged buyout, which would eclipse the previous record of $31.3 billion, paid for RJR Nabisco in 1989. That deal was the subject of the popular journalistic account "Barbarians at the Gate." Texas Pacific and KKR would pay about $70 per share for TXU, or about $32 billion, and assume more than $12 billion in debt. The deal could be officially announced as early as today.

Bonderman is trying to ensure that this buyout has a happier ending than a utility deal he attempted in 2004. Then, Bonderman tried to acquire Portland General Electric from the bankrupt Enron, but it ended up as a public relations disaster. Despite efforts to assuage customers and grass-roots groups, the buyout sparked picketing and vociferous opposition from Oregon legislators. The state's utility commission rejected the proposal in 2005.

This time, Bonderman was personally involved in the initial meetings with environmental groups. He assigned Reilly to lead the negotiations. He and his partners at Kohlberg Kravis Roberts also told TXU that they would walk away from the deal if the energy giant didn't scale down its coal plant expansion plans as a concession to environmental groups.

"Anyone doing an energy investment in today's situation has got to be sensitive of the change in the attitudes of the culture and the change in the attitudes of the country, and particularly the attitudes of Congress," said a person involved in the negotiations who spoke on condition of anonymity because the deal had not yet been announced.

But there are financial advantages to the environmental agreement, as well. When they acquire companies, private-equity firms typically try to cut costs rather than expand operations. TXU had estimated that the ambitious coal plant expansion would cost at least $10 billion; others suggested that with soaring construction costs, the ultimate price tag could be much higher.

Many power industry executives said they doubted TXU ever meant to build all 11 plants. "I think it is a bit of a gimmick," said the chief executive of another utility, who spoke on condition of anonymity for business reasons. He said that deregulation of the utility business in Texas has opened the state to competition on power generation. But with TXU claiming to build so much new generation, "who's going to jump in and say they don't believe them?"

Sources involved in the negotiation said TXU's assets -- which encompass a retail business with 2.4 million customers; more than 50 generating plants, including a nuclear facility; and a power wholesale business -- would not be split up if the deal gains approval from shareholders.

A turnaround at TXU would represent a reproach to C. John Wilder, TXU's chief executive, who in the past has criticized new technology that burns coal with fewer greenhouse gases as too expensive or technologically unsound. Although he is expected to retain his position at TXU, Wilder would be expected to consult with a new environmental advisory board that would include representatives from Environmental Defense and the Natural Resources Defense Council in San Francisco.