UPDATE 3-TXU recommends merger approval, CEO may leave

(Adds background on Wilder, updates terms of severance)

NEW YORK, July 25 (Reuters) - TXU Corp.TXU.N on Wednesday urged shareholders to vote for its planned $32 billion buyout, despite opposition from its largest shareholder, and said Chief Executive John Wilder would resign once the deal closed.

TXU in proxy materials filed with the U.S. Securities and Exchange Commission defended the $69.25-per-share offer from a private equity group led by Kohlberg Kravis Roberts & Co.[KKR.UL] and Texas Pacific Group [TPG.UL].

The filing came one day after money manager Franklin Resources Inc. (BEN.N: Quote, Profile, Research, Stock Buzz), the Texas power company's largest shareholder, said it would vote against the proposed buyout because the offer price was too low.

Franklin Resources, which owns a 4.35 percent stake, said that it believed TXU's stock would have performed better during the months since February, when it agreed to the buyout, if there were no deal. The company was not immediately available for comment on Wednesday.

TXU in the filing said $69.25 per share represented a "meaningful" premium to its stock price and the stock would probably not have done better without the deal, the largest leveraged buyout in history.

TXU shares were off 14 cents at $66.54 in afternoon New York Stock Exchange trade.

The Texas power company also said Vice Chairman Tom Baker would retire at the completion of the deal and set Sept. 7 as the date for shareholders to vote on the planned transaction.

The company said Wilder would remain chairman and CEO if the sale did not close. If the transaction did go forward, former U.S. Commerce Secretary Donald Evans would serve as nonexecutive chairman. TXU has not named a new CEO to succeed Wilder.