TXU, the largest power producer in Texas, said Monday that it had agreed to be sold to a group of private equity firms for about $32 billion in what would be the largest private buyout in U.S. corporate history if shareholders go along.

Kohlberg Kravis Roberts and Texas Pacific Group led a group that included Goldman Sachs and three other Wall Street firms that will pay $69.25 per share for TXU. They will also assume about $13 billion in debt

The firms won support for the buyout from some environmentalists who had criticized TXU. They agreed to sharply scale back TXU's controversial $10 billion plan to build 11 new coal-fired power plants that would produce tons of new greenhouse gas emissions.

They also agreed to cut electricity prices 10 percent, which they said would save TXU residential customers more than $300 million per year

TXU directors voted Sunday night to recommend that shareholders approve the sale. The price represents a 25 percent premium to TXU's recent average closing stock price before Friday.

The deal tops the previous biggest buyout ever of $25.1 billion set in 1988 when RJR Nabisco was acquired by Kohlberg Kravis.

Goldman Sachs, Lehman Brothers, Citigroup and Morgan Stanley also intend to be part of the purchasing group at closing, the company said.

TXU also said that former Secretary of State James Baker 3rd would serve as advisory chairman to the new owners.

The former head of the Environmental Protection Agency, William Reilly, and former Commerce Secretary Donald Evans will join the TXU board.

TXU, after almost going bankrupt in 2002 because of a failed overseas expansion, has rebounded and is expected to earn $2.6 billion in 2006, up 51 percent from a year earlier. Natural-gas prices that more than tripled in this decade have increased power prices in Texas, making TXU's coal and nuclear plants more valuable.

The plants can produce more than 18,300 megawatts, and the company is also the largest electricity retailer in the state, selling power to more than 2.2 million homes and businesses. TXU "turned into a good cash machine," said Perry Sioshansi, president of Menlo Energy Economics, a consulting firm in Walnut Creek, California.

Closely held leveraged-buyout firms use a mix of cash from investors plus their own funds and debt secured on the target they buy to finance their deals.

They typically seek to expand companies or improve performance before selling them within five years.

The chief executive of TXU, C. John Wilder, has overseen an almost fivefold gain in TXU shares since taking over in February 2004. Wilder has returned TXU to a focus on electric generation and distribution in the Dallas region.

To help gain approval for the transaction, TXU and its buyers are agreeing to abandon eight of 11 coal-fired generators the company planned to build and support mandatory U.S. limits on power-plant pollution that contributes to global warming.

The Natural Resources Defense Council and Environmental Defense negotiated in the past two weeks with the buyout firms and Goldman Sachs Group, which is advising on and financing the transaction. The company also will devote $400 million to cutting power demand in Texas.

Wilder's power plant expansion aimed to give the company more low- cost power to sell in the state's deregulated wholesale market. The prospect of increased pollution that could make smog worse in Houston and Dallas, and emissions of carbon dioxide, stirred opposition among environmentalists and mayors in the state.

Two proposed buyouts of utilities have failed in recent years, and two of the largest U.S. utility mergers have also been undone by opposition from state regulators and politicians.

Arizona state officials in December 2004 rejected the sale of UniSource Energy, owner of the state's second-biggest utility, to a partnership backed by KKR along with J.P. Morgan Partners and Wachovia Capital Partners. Oregon in March 2005 rejected a purchase of Portland General Electric by Texas Pacific.

KKR, based in New York, and Texas Pacific, of Fort Worth, Texas, have been partners on earlier utility buyouts. In July 2004, the firms were part of a group that bought Houston-based Texas Genco Holdings for $3.65 billion. They sold the company, the second- largest power generator in Texas, to NRG Energy for $5.8 billion in February 2006

KKR, founded in 1976, is almost done gathering $16.6 billion for its latest U.S. fund. Past investments include Toys "R" Us, Sungard Data Systems, and VNU Group.

Texas Pacific was founded in 1992 by David Bonderman, 64, James Coulter, 47, and Bill Price, 50. It raised $15 billion last year.