Shareholders of TXU txu approved the sale of the largest power generator in Texas for $32 billion on Friday in one of the biggest private buyouts ever.
Investors led by private equity firms Kohlberg Kravis Roberts and TPG, formerly Texas Pacific Group, hope to get the last regulatory approval and complete the deal in the next few weeks.
There may not be many more deals this size for a while, as banks have become reluctant to finance big takeovers. KKR and TPG locked up their financing at the height of the buyout binge earlier this year.
KKR and TPG plan to borrow up to $37.4 billion to swing the deal, in which they will also assume about $13 billion in old TXU debt.
More than 95% of the shares that were voted favored the merger. Under Texas law, TXU needed approval from the holders of two-thirds of all its shares, and got 74% for the sale. About one-fifth of shares weren't cast.
Analysts said approval was virtually assured after TXU's largest shareholder, fund manager Franklin Resources, switched from opposition to supporting the sale last week.
The major services that advise institutional investors on voting matters also recommended that TXU shareholders accept the KKR-TPG bid of $69.25 a share. Like Franklin, they said a tightening of credit markets made it unlikely anyone could finance a better offer.
"The credit markets to an extent worked in our favor for the vote," Chief Executive C. John Wilder said in a brief interview. "We got a great deal."
Wilder, who will leave TXU after the sale closes, said the KKR-TPG financing appeared to be in good order.
Former Commerce Secretary Donald Evans, who will become chairman of the holding company buying TXU, said the buyers were pleased with the vote.
"This transaction is not only good for TXU shareholders, but also for TXU customers and residents across the state of Texas," Evans said, vowing "stronger environmental policies and to providing reliable and affordable power."
About the only organized opposition left came from a few Texas consumer and environmental groups, who say that the new owners' plans to push ahead with construction of three coal-fired power plants will increase emissions of toxic mercury and gases tied to global warming.
A few protesters waving hand-scrawled signs stood outside the hotel where the shareholders were meeting.
Most shareholders, however, were like Travis Rhodes, who voted his 1,000 shares for the sale.
"I thought it was a good deal, and if it doesn't go through, the stock price will drop considerably," he said.
Rhodes said management did a good job to bring the company back from the brink of bankruptcy caused by a collapse in TXU's British subsidiary five years ago.
Homer Schmidt, a TXU retiree, voted his 30 shares for the deal, too. An employee starting in the 1950s, Schmidt said he never dreamed the company would be worth $32 billion.
"It's amazing," he said.
KKR and TPG still need approval from the Nuclear Regulatory Commission to take over TXU's nuclear reactor south of Fort Worth. On Thursday, the Federal Energy Regulatory Commission gave its blessing to the sale, finding no evidence that the change in ownership would hurt consumers.
KKR and TPG announced an agreement to buy TXU in late February after weeks of secret negotiations. The offer represented a 15% premium over the market price of TXU shares.
Wilder said he had never shopped the company and that interest from the buyout firms "came completely out of right field."
Private equity firms found TXU attractive because of its large fleet of power plants, including relatively cheap coal plants, and more than 2 million residential and business customers.
TXU's stock soared from late 2002 to late 2005. The dramatic climb slowed as the company came under fire for a sharp increase in electric rates after deregulation — Texas has among the nation's highest prices — and when company pushed for 11 new coal-fired plants in the state.
KKR co-founder Henry Kravis and TPG founding partner David Bonderman muted some of the criticism by agreeing to drop plans for eight of the coal plants and to reduce some rates.
Kravis said TXU had lost 700,000 customers mostly because of high rates, and that he would make the company more responsive to consumers.
The fate of the deal was in doubt, however, when Texas lawmakers threatened to pass anti-TXU legislation. TXU and the KKR-TPG group spent $17 million on a lobbying and advertising blitz, and the legislation died.