NEW YORK (Bloomberg) — Henry Kravis, whose 1989 take-over of RJR Nabisco Inc. rewrote the rules of leveraged buyouts, set a record yesterday with his firm’s $45 billion agreement to buy Dallas-based power producer TXU Corp.Kohlberg Kravis Roberts & Co. and partner Texas Pacific Group are the first to crack the $40 billion-mark for LBOs, a milestone that rivals such as Blackstone Group LP will try to pass. To get there, KKR and Texas Pacific negotiated concessions to win the support of environmental groups before the deal was approved by TXU’s board.

Kravis, 63, is under pressure to make ever-larger deals after raising more than $16 billion for New York-based KKR’s latest fund. Only the largest take-overs have the potential to generate the 20 percent-plus returns that investors expect.

“I’ve never seen so much money being thrown at deals,” Fred Joseph, managing partner of Morgan Joseph & Co. in New York and former chief executive officer of Drexel Burnham Lambert Inc., said yesterday in an interview.

Closely held LBO firms such as KKR and Fort Worth, Texas- based Texas Pacific 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.

KKR has invested in about 145 transactions with a combined enterprise value of more than $274 billion since Kravis founded the firm in 1976 with his first cousin George Roberts and Jerome Kohlberg, according to its Web site. The executives, all exiles from Bear Stearns Cos., in recent years have mostly bought companies with revenue of $200 million to $2 billion.

The RJR deal was stunning for its size — $31 billion including debt — and because it was a hostile bid. KKR won a protracted battle for the food and tobacco company, chronicled in the book “Barbarians at the Gate”. It broke even on the transaction.

KKR has increased the size of its deals as it raised bigger funds, including taking stakes in the $10.4 billion take-over of software maker Sungard Data Systems Inc. in August 2005 and the almost $14 billion acquisition of Danish phone company TDC A/S in January 2006.

RJR remained the largest-ever LBO, however, until last November, when KKR joined with Bain Capital LLC and Merrill Lynch & Co. to buy hospital chain HCA Inc. for about $33 billion. That record was broken two weeks ago when Blackstone completed its $39 billion buyout of Equity Office Properties Trust, the largest US owner of office buildings, for $39 billion.

“It’s the best seller’s market I’ve seen in my 43 years in the business,” Morgan & Joseph’s Joseph said.