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U.S. alleges insider trading on TXU

March 03, 2007|From the Associated Press

DALLAS — Federal regulators charged Friday that unknown investors pocketed more than $5.3 million in illegal profits from insider trading before TXU Corp. announced that it had agreed to be sold for $32 billion.

The Securities and Exchange Commission said the insider trading was done through foreign brokerage firms to conceal the investors' identities.

SEC lawyers in Fort Worth filed a lawsuit in federal district court in Chicago seeking restitution and civil fines against unknown defendants who bought options on TXU shares last week.

The SEC said the options allowed the defendants to buy shares when they hit prices ranging from $57.50 to $62.50. When the options were purchased, most if not all were above the price of TXU shares at the time.

The shares jumped 13.2% -- from $60.02 to $67.93 -- on Monday, when TXU announced that its board agreed to sell the utility to Kohlberg Kravis Roberts & Co., Texas Pacific Group and four Wall Street firms in what would be the largest leveraged buyout ever.

The buyers offered $69.25 a share.

Separately, TXU disclosed Friday that its purchasers had lined up $24.6 billion in debt financing to complete the deal.

The new debt would be heaped on top of TXU's current debt of about $12 billion, pushing the utility's total debt close to $37 billion. The TXU disclosure indicates that the buyers would contribute less than $8 billion to the deal.

Shares of TXU closed unchanged at $66.50.

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