TXU Mirant: Bewitched, Bothered & Bewildered Electric
Utility Comment, 04/19/2007
With the KKR and Texas-Pacific’s success in Texas, Mirant has publicly announced that it too would like a strategic BUYER (and I would like to be 25 years old again, with a 32-inch waste). Mirant’s “for sale” sign has yet to result in any buyers. It’s no wonder. The formerly bankrupt company has a much older portfolio of power plants and operates in lesser-desirable regulatory, political and business climates. This having been said, I’m sure some of the 70 companies that looked at TXU had given Mirant “a look.” The lack of interest is not a positive sign—and it is not particularly surprising—leaving Mirant bewitched, bothered and bewildered. I’m not bewildered. I am confident Mirant can find an investor (or investor group), with one minor exception—price.
For the reasons cited above, Mirant cannot realistically anticipated a large premium for its stock. The aged asset base suggests a need for new capital investment—just what a private investor doesn’t need—or want. In addition, its distribution chance involves some (I’ll be kind) “questionable” regulatory and political influences. This is not the perfect profile for a private investor—maybe for a “strategic” buyer, but the Bid/Ask spread may not be to Mirant’s liking. I suspect Mirant sees the private equity money entering the utility/energy market as the start of a trend—and
I would not necessarily disagree. However, until the traditional energy industry (power producer or distributor) can defuse political/regulatory intervention concerns (and
not many can), I do not expect a proliferation of takeovers.
Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by Whitehall Financial Advisors LLC, and its affiliates (“WFA”) to be reliable, but WFA does not make any representation or warranty, expressly or implied, as to its accuracy or completeness. The information contained herein is thus NOT intended to be used as the primary basis of any investment decisions. This information does not constitute investment advice. The information disclosed is also not an offer or a solicitation of an offer to BUY or SELL any security. The opinions, comments and conclusions discussed in this report may not be suitable for all investors or transferable to all investment opportunities. Investors must make their own investment decisions based on their specific investment objectives and financial position as well as use independent investment advisor(s) — WFA should not be considered as the primary source or basis for any investment decision.
This publication should be deemed advertising under all applicable,
respective state laws. Additional information is available upon request. Past performance should not be taken as an indication or
guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Opinions and estimates may be changed without notice, and WFA disclaims any obligation to advise you of any such change. WFA, or one or more of its partners or employees, from time to time may have long or short positions in, or buy and sell, the securities discussed herein. And WFA may underwrite or provide investment banking, credit or other financial services to companies discussed or referenced in various WFA publications, as well as those of others, including any and all media venues in the future.
