TXU Corp. (NYSE:TXU) is set to begin its road show today garner support
for a $32 billion buyout by private equity investors, indicating
concern about whether it will be able to drum up the necessary 2/3 vote
to seal the deal. The deal put together by KKR and TPG values TXU
shares at $69.25 a piece - a 25% premium to the predeal share price.
However, some shareholders aren't so sure that this is the best route
to unlock value.
Many investors are concerned that the company
negotiated the buyout price while it was under fire for building 11
coal power plants while also facing criticism for excessive executive
compensation. Moreover, the outlook for the U.S. power market has
improved substantially since the deal was announced last Spring.
Combined, these factors seem to imply that the buyout offer may now be
too low to be justified.
As a result, some investors believe
that TXU should pursue a split-up instead where it would be divided
into three businesses - an energy-driven wires business, a
power-generation business, and an energy retailer. Te company came out
strongly against such ideas in its proxy filing yesterday where it
indicated that a buyout represents a much better deal for shareholders.
However, the company said that if the buyout wasn't approved, this was
the route that it would take.
Whether or not the company can
drum up enough support to go through with their buyout offer remains to
be seen. However, the possibility of a split-up or increased buyout
offer make TXU a stock that is definitely
worth watching!
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