Assessing the Value of TXNM Energy's Proposed Sale to Blackstone Infrastructure: Is $61.25 a Fair Offer?

The proposed $61.25-per-share acquisition of TXNM Energy (NYSE: TXNM) by Blackstone Infrastructure has sparked intense debate among investors and legal experts. While the offer represents a 23% premium over the stock's 30-day volume-weighted average price (VWAP) as of March 2025, Kahn Swick & Foti, LLC (KSF)—led by former Louisiana Attorney General Charles C. Foti—has launched a formal investigation into whether the deal undervalues the company. This article examines the financial, regulatory, and strategic factors shaping the transaction, offering insights into whether the offer aligns with TXNM's intrinsic value.

Financial Metrics: A Premium, But at What Cost?

TXNM Energy's financials present a mixed picture. As of Q2 2025, the company reported a 58% year-over-year decline in non-GAAP earnings per share and a 55% drop in GAAP net earnings, driven by rising costs, margin compression, and equity dilution. The $600 million equity issuance—$400 million of which came from Blackstone—has diluted earnings per share, further complicating valuation analysis.

Despite these challenges, TXNM's trailing P/E ratio of 29.73 and forward P/E of 20.24 suggest a valuation anchored to earnings growth expectations. Analysts project a forward P/E of 20.24, reflecting optimism about future performance. Meanwhile, the company's EBITDA margin of 45% and a forward EV/EBITDA multiple of 12.7x indicate strong operational efficiency. A discounted cash flow (DCF) model, however, suggests an intrinsic value of $66.24 per share—a 16% upside to the $61.25 offer—based on a 5.39% WACC and long-term cash flow projections.

Regulatory and Strategic Considerations

The deal's success hinges on regulatory approvals from the Public Utility Commission of Texas, the New Mexico Public Regulation Commission, and federal agencies. Blackstone has pledged to fund the acquisition entirely with equity, avoiding leverage increases, and has committed to $400 million in new equity to support TXNM's growth plans. These terms align with the company's long-term infrastructure goals, including 450 megawatts of solar and battery storage capacity by 2028 and 2,900 megawatts of new capacity by 2032.

However, the regulatory process introduces uncertainty. TXNM's management transition—Pat Collawn stepping down as Executive Chair and Don Tarry assuming leadership—predates the merger announcement, but the timing raises questions about whether the board's decision-making was influenced by external pressures. Blackstone's emphasis on “win-win, growth-oriented investments” contrasts with TXNM's recent earnings struggles, creating a tension between short-term gains and long-term value creation.

KSF's Investigation: Fairness or Fiduciary Breach?

KSF's probe centers on two key questions: Is the $61.25 offer adequate, and was the process leading to the deal transparent? The firm is scrutinizing whether TXNM's board adequately represented shareholder interests, particularly given the company's withheld 2025 earnings guidance and the $19.5 million in merger-related costs that distorted Q2 results.

The investigation also highlights TXNM's recent regulatory wins, including a $105 million rate increase for PNM and a $176 million rate base increase for TNMP. These approvals are critical for funding grid modernization and renewable energy projects, yet the $61.25 offer may not fully account for their long-term value. KSF is encouraging shareholders to weigh in, noting that the transaction's fairness could hinge on whether the board prioritized immediate liquidity over strategic growth.

Investment Implications

For investors, the $61.25 offer sits at a crossroads. On one hand, the 23% premium and Blackstone's equity commitment provide immediate liquidity and stability. On the other, the DCF model and EV/EBITDA analysis suggest the offer may undervalue TXNM's future potential, particularly if the company secures regulatory approvals and executes its clean energy transition.

The risks are significant. TXNM's earnings volatility, regulatory hurdles, and equity dilution could erode shareholder value if the deal closes as structured. Conversely, the company's strategic alignment with New Mexico's clean energy goals and Texas's growth trajectory could unlock upside if Blackstone's investment proves transformative.

Conclusion: A Deal Worth Watching

The proposed sale of TXNM Energy to Blackstone Infrastructure is a complex transaction with no clear-cut answer. While the $61.25 offer provides a premium, KSF's investigation and the DCF analysis suggest the company's intrinsic value may be higher. Investors should monitor the regulatory process, TXNM's earnings trajectory, and the outcomes of KSF's and Johnson Fistel's investigations. For now, the deal remains a high-stakes gamble—one that could either deliver fair value or leave shareholders questioning the board's stewardship.

In the end, the $61.25 offer may reflect a pragmatic compromise in a volatile market. But for those who believe in TXNM's long-term vision, the current price could represent an opportunity—if the risks of regulatory delays and earnings volatility are carefully managed.