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Texas-New Mexico Power in Leveraged Buyout

Texas-New Mexico Power in Leveraged Buyout

TNP Enterprises, the parent company of Texas-New Mexico Power Co. (TNMP), was bought by a group of investors headed by William Catacosinos, the former CEO of Long Island Lighting Co., for $1 billion, including assumed debt, the parties announced last week. The deal, which TNP said was the first leveraged buyout of an electric utility, is expected to close in six to nine months.

The electric utility said the transaction signified an innovative approach on its part to deal with the consolidation trend. The investor group will allow the utility to operate as a stand-alone entity. No layoffs will result from the transaction, and TNMP's transition to competition in its service area will not be affected. TNP serves 229,000 customers in Texas and New Mexico.

"It allows us to continue our community-based service programs for our customers," said Kevern Joyce, CEO of TNP Enterprises, "and gives us an opportunity to be part of a growing business with no layoffs for our employees."

The agreement has been unanimously approved by TNP's board of directors. Shareholders will receive $44/share in cash, which equals a 39% premium over the 30-day average price. The investor group will assume $400 million in TNP debt, a TNP spokesperson said. If the deal is approved, TNP will have switched from a public corporation to a privately owned corporation.

The transaction still needs approvals from FERC, TNP Enterprises shareholders, and regulators in New Mexico and Texas.

John Norris

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