TXU To Be Acquired by KKR in Largest Deal of Its Type (TXU, BRK/A)

CNBC’s merger star watch dog and scoop artist David Faber just announced that TXU Corp. (TXU) will be acquired by KKR over the weekend.  TXU is the Texas power plant that controls much of the power in the state.  The market cap of TXU is $27.5 Billion and $12.3 Billion in debt, so in a cash deal any premium would top the latest buyout of Equity Office and should be the largest LBO ever.  Any premium will make this roughly the largest private equity buyout ever.

So where is Warren Buffett and his power plant acquisitions that he had been discussing for Berkshire Hathaway (BRK/A)?  He even said the likes of "one $10 Billion deal is easier to do than ten $1 Billion deal…".  TXU shares are up 13% at $68.00 in after-hours; the 52-week high is $67.21.  Before the deal was announced TXU traded with a 14.6 P/E ratio and had a 3.1% dividend yield.

Other utilities to focus on after this are the following (partial list):
Duke Energy (DUK) $30 Billion market cap;
FPL Group (FPL) $24.9 Billion;
Entergy (ETR) $20 Billion market cap;
Firstenergy (FE) $20 Billion market cap;
American Electric Power (AEP) $18 Billion market cap;
Edison Int’l (EIX) $15 Billion market cap;
AES Corp (AES) $14.9 Billion market cap;
PPL Corp. (PPL) $14.1 Billion market cap;
Constellation (CEG) $13.7 Billion market cap;
Progress Energy (PGN) $12.9 Billion market cap;
Xcel Energy (XEL) $9.9 Billion market cap;
DTE Energy (DTE) $8.5 Billion market cap;
NRG Energy (NRG) $7.9 Billion market cap.

We already offered a break-up value of Duke (DUK) and here is what we came up with: $29.00 as of FEB 09, 2007.  Have a great weekend, and enjoy comparing the power utility valuations over the weekend.

Jon C. Ogg
February 23, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.