One of TXU’s major shareholders, Franklin Resources, is publicly fighting the proposed buyout of the company by Kohlberg Kravis Roberts and Texas Pacific Group, on the grounds of an inadequate bid (See related article at DealBook). Franklin appears to be gearing up for a stand-off, however, the strong ties between TXU and KKR/TPG may not allow the opposition to make much headway. The IntellectSpace Knowledge Maps shown here illustrates TXU’s strong connections to its prospective buyers.
This first Knowledge Map, taken from a previous analysis (See article) displays the connections between TXU and KKR. The links run deep, including shared board memberships through Gillette Co. (now owned by Proctor & Gamble) by Lawrence E. Fouraker, an advisor and former TXU director of TXU, and Henry Kravis, a KKR co-founder, director, and senior partner. The Knowledge Map also displays some additional relationships that may leveraged in this deal, including members of Business Roundtable and affiliations to Harvard Business School. 
Click here for an interactive version of this IntellectSpace Knowledge Map (Internet Explorer browsers only): http://nv.intellectspace.com/ispace/GuestMonitor.aspx?id=7813416e-6678-48de-8ff3-3753200492d3
This next Knowledge Map shows the connections that TXU has to Texas Pacific Group. Like those with KKR, the companies share a number of strong ties that may have contributed to the acquisition. One of the more significant links is between Leonard H. Roberts, a TXU director and Gary M. Kusin, a special advisor to TPG. The two can be connected through Radio Shack Corporation, where Roberts was previously the Chairman and CEO and Kusin was a director. Their time at Radio Shack overlapped, so we can be quite sure that they knew each other.
Another relationship to support TXU’s ties to TPG also includes Lawrence Fouraker, who was mentioned above as being linked to KKR. Fouraker was a longtime director at General Electric, and likely knew TPG’s founder and managing partner, William Price III. Price served at Vice President, Strategic Planning and Business Development at GE during the time that Fouraker was a board member. If the two had maintained contact since the time they were both at GE, the relationship may have come into play when planning this latest acquisition.
A final connection shown on the Knowledge Map links TXU to TPG through Royal Dutch Shell PLC. TXU’s Chairman and CEO, C. John Wilder, and Jack E. Little, a TXU director, both held senior executive positions at Shell at the time when Stephen M. Wood was Vice President of a Shell subsidiary. Wood was previously the head of Kraton Polymers until 2004, when the company was purchased by TPG. The acquisition of Kraton would have put Wood in direct contact with Texas PacificGroup’s leadership team, opening up the opportunity to form relationships and offer input, especially considering his connection to TXU’s top decision makers. 
Click here for an interactive version of this IntellectSpace Knowledge Map (Internet Explorer browsers only): http://nv.intellectspace.com/ispace/GuestMonitor.aspx?id=0bdb3b17-a320-43d6-8748-ceffa46fa6da
Based on these impressive connections linking TXU to its buyers, Franklin Resources may have its work cut out in leading efforts to renegotiate the terms of the acquisition. The benefits that come with being closely associated to begin with may outweigh the need to risk the deal by demanding a higher offer.
Henry R Kravis, the head of Kohlberg Kravis Roberts and undoubtedly one of the most powerful men in private equity, is coming under fire today with the release of Brave New Film’s “The War on Greed.” The documentary film takes a critical look at the private equity industry and specifically focuses on Kravis, painting him in a not-so-positive light. The news has motivated a number of private equity analysts to come to the defense of Kravis and the industry, claiming that the film offers critiques based on narrow and simplistic arguments that don’t necessarily hold true to reality (see article by Dan Primack in Private Equity HUB). 
