Environmental Defense Fund and the Leveraged Buyout of TXU

Case Solution

Adam Fremeth, Margaret Loudermilk
Ivey Publishing ()

In 2006, the Texas Regional Director of the Environmental Defense Fund (EDF) was addressing a hearing on permits for new coal power plants for the Texas Electric Power Company TXU when he received a call from private equity firm Texas Pacific Group about TXU. The plans received 11 new coal-fired power plants to be built. How did you negotiate with the private equity firm as they searched for the largest leveraged buyout deal on the balance sheet? The private equity firm was against acquiring a company embroiled in an uphill battle with environmentalists, claiming it was willing to make substantial concessions. However, as a non-governmental environmental organization, EDF would be exposed to significant risks if it chose to work with TXU and private equity companies to facilitate this transaction. Should EDF support the acquisition and what concessions should it seek in return?

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