CNBC's Faber: KKR, Texas Pacific Close to Record Deal for TXU

CNBC ^ | 2-23-07 | David Faber

[Dysart]

In what will be the largest leveraged buyout of all time, the private equity firms of KKR and Texas Pacific Group are close to announcing a more than $40 billion purchase of TXU. The giant Texas utility that is the largest producer of power in that state, CNBC's David Faber has learned.

TXU's board is expected to vote on the deal this weekend and an announcement is likely on Monday morning, people familiar with the situation told Faber.

TXU, KKR and Texas Pacific officials declined comment.The exact price KKR will pay is unclear, Faber said. TXU's current market cap is $27.5 billion. It also has $12.3 billion in debt. Since the consideration will be in cash and given TXU's current enterprise value is roughly $39 billion, the addition of any premium will make it the largest LBO ever, topping Blackstone's recent $39 billion buyout of Equity Office Properties.

The deal itself will require at least $6 billion to $7 billion in equity and in what is a recent trend, it appears banks will bridge some portion of that commitment until KKR can sell down its overall commitment. That was done in Blackstone's purchase of Equity Office Properties.The exact price KKR will pay is unclear, Faber said. TXU's current market cap is $27.5 billion. It also has $12.3 billion in debt. Since the consideration will be in cash and given TXU's current enterprise value is roughly $39 billion, the addition of any premium will make it the largest LBO ever, topping Blackstone's recent $39 billion buyout of Equity Office Properties.

[Dysart]

Heads up Texas utility customers.

[Brilliant]

Texas is on the cutting edge of power industry deregulation. Hope it works.