ThePanelist.com - Do I Play the Buyout of TXU Corp (TXU)

Do I Play the Buyout of TXU Corp (TXU)

Written by David Neubert

Monday, 26 February 2007

Do I buy TXU Corp (TXU - $67.93) now because KKR is buying the company and maybe the price goes higher?

Naw, not with a P/E of 16.5 and price to cash flow of multiple on this deal at $69.25 a share, local lawmakers trying to punish the utility with rate decreases because of the coal plants, and environmentalists out to get them. I say if KKR wants TXU, let them have it. I don't think KKR knows what kind of mess they are getting themselves into. If the deal falls apart because of look out below on the stock price, there is not a cheap valuation to support it.

Disclosures and Confessions: I do not own TXU.

In addition to KKR and Texas Pacific, Goldman Sachs Group (GS), Morgan Stanley
(MS), Citigroup Inc. (C) and Lehman Brothers Holdings Inc. (LEH) will own part of Dallas-based TXU. I am a former employee of Morgan Stanley (MS) and Lehman Brothers(LEH), I am vested in their executive compensation, stock ownership and options plans. I also own shares in Citigroup (C).

I do use lots of electricity, I'd like to use less. I wish electricity cost more so that people would have more incentive to use less.

Disclaimer: Nothing in this trade log is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security. Options may be for me but they are are not for everyone.

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written by Davis Freeberg , February 26, 2007

Good list of reasons to avoid, those petty local issues can always turn out to be a lot more work getting them resolved then their should. I'll also throw in that natural gas is far too volatile. It's OK over the long run, but if the merger closes earlier or later then expected, I could see a big price movement getting in the way of completing the deal. Too much gambling, not enough investing. I'd rather stick to an industry or company where I feel like I've got an edge.

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written by kevinc , February 28, 2007

Raising prices to decrease demand?? Didn't work so well for cigarettes and I don't like the ideas of "welfare mothers" smoking in the dark...

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