Talen Energy (TLN) to Merge With Riverstone Holdings in $5.2B Deal

Shares of Talen Energy Corporation (TLN) were trading up +1.86 or +15.58 percent to $13.80 per share in Friday’s pre-market after news that the company had entered into a definitive merger agreement with Riverside Holdings LLC early this morning. Talen Energy stock closed at $11.94 per share, down -0.09 or -0.75 percent in Thursday’s regular trading session.

Stock Analysis

Founded on June 1st, 2015, Allentown, Pennsylvania-based Talen Energy Corp is a product of the spinoff of PPL Corporation’s (PPL) power generation business which merged with Riverstone Holdings to form Talen Energy Corp. After the initial transactions, PPL Corp. shareholders were left owning 65 percent of Talen common stock while Riverstone Holdings owned 35 percent.
Talen Energy is one of North America’s largest competitive energy and power generation companies with ownership or control of 16,000 megawatts of generating capacity in choice wholesale power markets in the Northeast, Southwest and Mid-Atlantic regions in the United States.

Riverstone Holdings LLC is a privately held private equity firm that specializes in buyouts, industry consolidation, emerging growth, recapitalization, public market opportunities and restructuring investments to name a few. The company does not make venture capital investments and specializes in the oil and gas industries, power and coal, energy services and renewable and alternative energy sources.

Under the terms of the agreement, all shares not already owned by Riverstone will be acquired by Riverstone for $14.00 per share in cash. Riverstone currently owns approximately 35 percent of Talen Energy shares which it acquired when they were issued in June of 2015, establishing Talen by combining assets owned by affiliates of PPL Corp. and Riverstone. The deal is worth approximately $5.2 billion and represents a 56 percent premium to Talen stock’s closing price of $9.00 per share on March 31st and a 101 percent premium over Talen stock’s 60 day volume weighted average price of $6.95 through the March 31st date.

Paul Farr, Talen Energy President and Chief Executive Officer said in the company’s press release that, “We believe the transaction offers compelling value to our stockholders, while eliminating execution risk, and will provide additional momentum to the outstanding work our employees have done to drive improvements in the safety, reliability and efficiency of our plants in the time since we became an independent company”.

David M. Leuschen and Pierre F. Lapeyre, Jr., co-founders of Riverstone Holdings LLC, stated that “As an experienced owner of power generation assets, Riverstone is excited to acquire Talen Energy and its world class generating fleet, which is located in some of the United States' most attractive power markets.”

The deal provides Talen Energy with a “go shop” provision, in which Talen Energy and its financial advisors can actively solicit, receive and potentially enter into negotiations with other parties offering alternative proposals. The “go shop” period is for 40 days and will allow for continued negotiations between Talen and Riverstone, with an additional 20 days extension subject to requirements in the original agreement, to persons or groups that make a superior proposal. In the event of termination of the agreement due to a superior proposal, Talen will pay Riverstone a termination fee of $50 million, which would be reduced to $25 million if Talen accepts a superior proposal during the “go shop” period.

Other News About TLN

TALEN (TLN) ALERT: Johnson & Weaver, LLP Launches an Investigation into the Fairness of Price and Process in Proposed Sale of Talen Energy Corporation; Are Shareholders Getting a Fair Price?

San Diego law firm has launched an investigation whether Talen board members breached their duties in connection with the merger.

Talen Energy beats 1Q profit forecasts

First quarter earnings beat analyst forecasts by a wide margin.

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Published on Jun 3, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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