Atmos Deal Fires Up TXU

TXU (TXU Quote - Cramer on TXU - Stock Picks) has scratched another major item off its to-do list.

Less than two months after putting it up for sale, the Texas-based utility has found a buyer for its gas transmission business. The company will sell TXU Gas -- the largest natural gas utility in the state -- for $1.93 billion that it can now use to pay down debt. The transaction is the latest in a string of accomplishments for turnaround CEO John Wilder, who has scored big points with the market for taking decisive steps to restore the utility's health.

Atmos Energy (ATO Quote - Cramer on ATO - Stock Picks), the prospective buyer of TXU Gas, is also on a roll. The company, which has transformed itself from a West Texas gas company into a multistate player, will emerge from the deal as the largest pure-play natural gas utility in the nation.

Both parties celebrated the transaction on Thursday. Wilder said the deal will allow TXU to keep "unlocking value and focusing on core businesses." Meanwhile, Atmos said the acquisition will further the company's growth strategy and immediately boost profits.

TXU's stock, which jumped in premarket trading when the deal was announced, had settled down with a gain of less than 1% at $38.15 by late Thursday morning. Atmos, relying on new debt and equity to finance the deal, was off 15 cents at $24.85.

TXU is in the process of selling off billions of dollars worth of assets in an effort to cut its huge debt load by nearly half. Like many in the sector, TXU borrowed heavily to expand into the international energy business. But the utility is now in the process of shrinking -- having already sold its big power operation in Australia -- and is now focused on becoming a more stable domestic company instead.