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Why Going Private Is a Good Result for Talen

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Talen Energy faces difficult issues

As we saw in the first part of the series, private equity firm Riverstone is taking Talen Energy (TLN) private in a $5.2 billion transaction. Talen shareholders will receive $14 in cash. Riverstone already holds 35% of Talen. It was created by joining assets from Riverstone and PPL (PPL). Talen owns power generation assets. However, it mainly owns coal and nuclear. Given the company’s close proximity to the Marcellus Shale region, it faces competition from other electricity generating companies that use cheap natural gas.

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Management’s comments

“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,” said Paul Farr, Talen Energy’s president and CEO.

“The disinterested directors of the Board, not including the two Riverstone directors, with the assistance of our financial and legal advisors, carefully analyzed Riverstone’s offer, and after extensive negotiation and thorough consideration, concluded that the agreement we are announcing today is in the best interests of our stockholders,” said Stuart E. Graham, chairman of Talen Energy’s Board of Directors.

David M. Leuschen and Pierre F. Lapeyre, Jr., are co-founders of Riverstone. They added 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.”

Other merger arbitrage resources

Other important merger spreads include the merger of Cigna (CI) and Anthem (ANTM). It’s expected to close by mid-2016. Another important deal includes the Humana (HUM) and Aetna (AET) transaction. It’s slated to close in late 2016. For a primer on risk arbitrage investing, read Merger arbitrage must-knows: A key guide for investors.

Investors who are interested in trading in the utilities space should look at the S&P SPDR Utilities ETF (XLU).

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