ARTICLE
ALLENTOWN — As has been rumored for weeks, Talen Energy — created barely a year ago when it was spun off from PPL Corp. — will be merged with a New York City-based private investment firm that specializes in the energy industry. Talen announced Friday that it has entered into a definitive merger agreement with affiliates of Riverstone Holdings LLC, its largest individual stockholder controlling 35 percent of the company's stock. Under terms of the merger agreement, all outstanding shares of Talen Energy common stock not currently owned by Riverstone affiliated entities will be acquired for $14 per share in cash. Riverstone will buy the remaining stake in Talen for $1.8 billion, while the agreement has an enterprise value, an economic measure reflecting the market value of the whole business, of $5.2 billion. The implications of the deal for Talen employees and downtown Allentown were not immediately clear. The company's headquarters, with 400 white-collar employees, occupies most of PPL Plaza. The building is located in the Neighborhood Improvement Zone, across Ninth Street from the landmark PPL Tower on Hamilton Street, but Talen has been looking to nail down a permanent headquarters location since it was spun off from PPL. "We have been discussing options for official locations in the NIZ and Allentown with developers for quite some time now," said spokesman George Lewis. "We still don't have a decision yet." And, since the company is just starting the process of completing the transaction with Riverstone, Lewis said "it's too early to say what happens with those discussions in light of the announcement [Friday]." "Rumors involving Talen have been circulating for some time, so news of the merger does not come as a surprise," Allentown Mayor Ed Pawlowski said in a statement. "Efforts had been underway for months on a number of fronts to keep Talen in the city. The city will work with Riverstone to do all that it can to keep a strong presence here." Tony Iannelli, president and CEO of the Greater Lehigh Valley Chamber of Commerce, said internationally known companies with local headquarters, such as Talen, PPL Corp. and Air Products, have boosted the area's corporate achievements. "In a sense, we're the victim of our own success," Iannelli said. The challenge, he said, is convincing those companies' leaders to remain committed to staying in the Valley and not base decisions to move on different criteria, such as return on investment. For Allentown, the sale has wide-reaching implications that go well beyond its impact on Talen or Riverstone. Sources dating back to last summer have said Talen has been negotiating with Waterfront Partners to relocate Talen's headquarters into the proposed Waterfront office park along the Lehigh River. Waterfront principal Mark Jaindl has never confirmed what sources have told The Morning Call — that Talen has been negotiating exclusively with Waterfront officials since last fall to relocate the company there — but he did get approval from the Allentown Neighborhood Improvement Zone Development Authority to alter the Waterfront's masterplan to include an eight-story building where sources say Talen would locate. Talen, sources said, was to be the anchor of a $325 million development that is slow in getting off the ground. Developers are in the midst of spending $6 million to build roads and utilities for the six office buildings and 400 apartment units, but groundbreaking on the buildings is months behind schedule. Jaindl said Friday that if an acquisition for Talen was inevitable — and many believed it was — he is encouraged that it's by Riverstone, rather than a massive energy company he believes would be more likely to move out of Allentown. "I believe Riverstone is going to find its greatest efficiencies, in term of employees and office space, within the city of Allentown. We hope they stay, but that's up to them," Jaindl said. "That said, if Riverstone makes a decision to move, there are other tenants out there. The Waterfront is not reliant on any one tenant." Don Cunningham, president and CEO of the Lehigh Valley Economic Development Corp., said he hopes Allentown's proximity to New York City, where Riverstone is based, the existing Talen workforce and Riverstone's familiarity with the company will work to the Lehigh Valley's advantage. "In terms of purchase, this is a better scenario than if Talen would have been purchased by an entity that was unfamiliar or uninvolved with the company or was located in Texas or Louisiana," he said. "Hopefully, the familiarity and the existing involvement with Talen will be a help in utilizing the value of the employees that are here and the location." Almost as soon as it was created, Talen ran into the teeth of a highly competitive independent power generation industry that was rapidly consolidating. It is now the smallest of four publicly-held companies that generate and market power without being affiliated with a public utility. Low natural gas prices put pressure on profit margins and the stock price of Talen and many of its competitors suffered. Talen's market value had fallen more than 50 percent since its stock was issued last year, but had recovered recently as rumors swirled that it might be acquired. Riverstone's purchase price represents a 56 percent premium to the closing price of $9 per share on March 31, the last trading day before public reports of a potential sale of Talen, and a 101 percent premium to the 60-day volume-weighted average price of $6.95 per share through March 31. Talen executives have hinted for months that they would consider allowing the company to be acquired in a "take private" transaction, but said they were considering all options. "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," Paul Farr, Talen president and CEO, said in a news release. David M. Leuschen and Pierre F. Lapeyre, Jr., co-founders of Riverstone, said in a statement: "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 must be reviewed by federal regulators, including the Federal Energy Regulatory Commission and is subject to "go-shop" period in which Talen can attempt to find superior offers. It is expected to close by the end of the year. Founded in 2000, Riverstone conducts "buyout and growth capital investments in the exploration and production, midstream, oilfield services, power, and renewable sectors of the energy industry," according to the company's website. It has offices in New York, London, Houston and Mexico City and has invested more than $30 billion in 120 properties worldwide. "They know the assets that we have," Lewis said of Riverstone. "A number of the plants that we own and operate were Riverstone properties prior to the deal that formed Talen Energy. They know Talen and our operations very well." Talen's white-collar employees have a strong presence downtown and provide lunch customers for the growing roster of restaurants. Farr has said the company plans to choose a permanent location for its corporate headquarters, but that decision has not been announced. The company's lease at PPL Plaza expires in 2018. See the full article here.
ALLENTOWN — As has been rumored for weeks, Talen Energy — created barely a year ago when it was spun off from PPL Corp. — will be merged with a New York City-based private investment firm that specializes in the energy industry.
Talen announced Friday that it has entered into a definitive merger agreement with affiliates of Riverstone Holdings LLC, its largest individual stockholder controlling 35 percent of the company's stock.
Under terms of the merger agreement, all outstanding shares of Talen Energy common stock not currently owned by Riverstone affiliated entities will be acquired for $14 per share in cash. Riverstone will buy the remaining stake in Talen for $1.8 billion, while the agreement has an enterprise value, an economic measure reflecting the market value of the whole business, of $5.2 billion.
The implications of the deal for Talen employees and downtown Allentown were not immediately clear. The company's headquarters, with 400 white-collar employees, occupies most of PPL Plaza.
The building is located in the Neighborhood Improvement Zone, across Ninth Street from the landmark PPL Tower on Hamilton Street, but Talen has been looking to nail down a permanent headquarters location since it was spun off from PPL.
"We have been discussing options for official locations in the NIZ and Allentown with developers for quite some time now," said spokesman George Lewis. "We still don't have a decision yet."
And, since the company is just starting the process of completing the transaction with Riverstone, Lewis said "it's too early to say what happens with those discussions in light of the announcement [Friday]."
"Rumors involving Talen have been circulating for some time, so news of the merger does not come as a surprise," Allentown Mayor Ed Pawlowski said in a statement. "Efforts had been underway for months on a number of fronts to keep Talen in the city. The city will work with Riverstone to do all that it can to keep a strong presence here."
Tony Iannelli, president and CEO of the Greater Lehigh Valley Chamber of Commerce, said internationally known companies with local headquarters, such as Talen, PPL Corp. and Air Products, have boosted the area's corporate achievements.
"In a sense, we're the victim of our own success," Iannelli said.
The challenge, he said, is convincing those companies' leaders to remain committed to staying in the Valley and not base decisions to move on different criteria, such as return on investment.
For Allentown, the sale has wide-reaching implications that go well beyond its impact on Talen or Riverstone. Sources dating back to last summer have said Talen has been negotiating with Waterfront Partners to relocate Talen's headquarters into the proposed Waterfront office park along the Lehigh River.
Waterfront principal Mark Jaindl has never confirmed what sources have told The Morning Call — that Talen has been negotiating exclusively with Waterfront officials since last fall to relocate the company there — but he did get approval from the Allentown Neighborhood Improvement Zone Development Authority to alter the Waterfront's masterplan to include an eight-story building where sources say Talen would locate.
Talen, sources said, was to be the anchor of a $325 million development that is slow in getting off the ground. Developers are in the midst of spending $6 million to build roads and utilities for the six office buildings and 400 apartment units, but groundbreaking on the buildings is months behind schedule.
Jaindl said Friday that if an acquisition for Talen was inevitable — and many believed it was — he is encouraged that it's by Riverstone, rather than a massive energy company he believes would be more likely to move out of Allentown.
"I believe Riverstone is going to find its greatest efficiencies, in term of employees and office space, within the city of Allentown. We hope they stay, but that's up to them," Jaindl said. "That said, if Riverstone makes a decision to move, there are other tenants out there. The Waterfront is not reliant on any one tenant."
Don Cunningham, president and CEO of the Lehigh Valley Economic Development Corp., said he hopes Allentown's proximity to New York City, where Riverstone is based, the existing Talen workforce and Riverstone's familiarity with the company will work to the Lehigh Valley's advantage.
"In terms of purchase, this is a better scenario than if Talen would have been purchased by an entity that was unfamiliar or uninvolved with the company or was located in Texas or Louisiana," he said. "Hopefully, the familiarity and the existing involvement with Talen will be a help in utilizing the value of the employees that are here and the location."
Almost as soon as it was created, Talen ran into the teeth of a highly competitive independent power generation industry that was rapidly consolidating. It is now the smallest of four publicly-held companies that generate and market power without being affiliated with a public utility.
Low natural gas prices put pressure on profit margins and the stock price of Talen and many of its competitors suffered. Talen's market value had fallen more than 50 percent since its stock was issued last year, but had recovered recently as rumors swirled that it might be acquired.
Riverstone's purchase price represents a 56 percent premium to the closing price of $9 per share on March 31, the last trading day before public reports of a potential sale of Talen, and a 101 percent premium to the 60-day volume-weighted average price of $6.95 per share through March 31.
Talen executives have hinted for months that they would consider allowing the company to be acquired in a "take private" transaction, but said they were considering all options.
"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," Paul Farr, Talen president and CEO, said in a news release.
David M. Leuschen and Pierre F. Lapeyre, Jr., co-founders of Riverstone, said in a statement: "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 must be reviewed by federal regulators, including the Federal Energy Regulatory Commission and is subject to "go-shop" period in which Talen can attempt to find superior offers. It is expected to close by the end of the year.
Founded in 2000, Riverstone conducts "buyout and growth capital investments in the exploration and production, midstream, oilfield services, power, and renewable sectors of the energy industry," according to the company's website.
It has offices in New York, London, Houston and Mexico City and has invested more than $30 billion in 120 properties worldwide.
"They know the assets that we have," Lewis said of Riverstone. "A number of the plants that we own and operate were Riverstone properties prior to the deal that formed Talen Energy. They know Talen and our operations very well."
Talen's white-collar employees have a strong presence downtown and provide lunch customers for the growing roster of restaurants. Farr has said the company plans to choose a permanent location for its corporate headquarters, but that decision has not been announced. The company's lease at PPL Plaza expires in 2018. See the full article here.