TXU: Buyout or Breakup

DALLAS (AP) — TXU Corp. said Monday it probably would break into three separate companies if it can't complete a $32 billion sale to private investors.

The company said regulatory and legislative challenges could force it to separate its power-generation, distribution and electricity-retailing divisions.

TXU made the comments in a regulatory filing as it launched a road show designed to convince key shareholders to support the sale of the power company to investors led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group.

Shareholders are scheduled to vote on the offer Sept. 7, with two-thirds support needed for approval.

In a filing Monday with the Securities and Exchange Commission, TXU argued — as it has before — that it is unlikely to get a better deal than the $69.25-per-share offer from KKR and TPG.

The Dallas-based company released the outline of a presentation that it would make, starting Monday, to key shareholders and the Institutional Shareholder Services. ISS advises investors how to vote in company elections.

TXU said if the sale fails, leaving it an independent company, it would probably have to borrow $5 billion to $6 billion at its power-generation division to pay for share buybacks and capital expenses.

The cost of such borrowing, TXU said, has risen significantly over the past month “and could reduce the value of TXU's standalone plan.”

Luminant is the largest power generator in Texas. TXU also operates a regulated distribution company called Oncor and TXU Energy, which sells electricity to consumers and businesses.

State regulators had no role in approving the sale. TXU lobbied aggressively and successfully against legislation to give the Texas Public Utility Commission that right. Lawmakers passed a watered-down bill to require some oversight of sales of regulated utilities, but they exempted the pending KKR-TPG purchase of TXU from the bill.

TXU said Monday that the utility commission's review of future deals reduced the chance that future buyers would pay a premium for Oncor.

Shares of TXU fell 5 cents, to $63.60 in late-afternoon trading.