Private equity firm Energy Capital Partners is reportedly planning to acquire Calpine Corporation (NYSE:CPN).
A recent Bloomberg report stated that Energy Capital Partners is currently in acquisition talks with Calpine. Sources familiar with the dealings claim that the private equity firm may announce the acquisition deal within the next few days. This suggests that the negotiations have been going well and there is therefore a high likelihood that the deal will go through. The unnamed sources also pointed out that the deal is yet to reach a final agreement, meaning both parties could pull out of the talks at any moment.
“The tentative deal with Energy Capital could be announced next week,” stated Bloomberg.
Spokespersons for both firms have turned down requests for comments, owing to the private nature of the negotiations. Analysts believe that an acquisition deal for the acquisition of the merchant power company might be valued at $15 per share. Calpine shares went up to $14.47 during intraday trading in New York, marking a 4.5 percent rise. This is also the highest point that the stock has reached since July last year.
What the deal means for both companies
It is important to note that Energy Capital Partners also happens to be a major investor in Dynegy Inc. (NYSE:DYN). The latter is a rival to Calpine and thus the acquisition means it will belong to an entity with similar interests for both firms. Calpine also happens to be one of the power companies that have turned to consolidation in order to stay afloat. Many power companies have suffered a massive blow due to the rise of renewable energy resources and natural gas. Some companies have even opted to get out the market.
Things have not been working out so well for Calpine. The firm had a loss of $56 million in the first quarter this year which was a significant improvement compared to $198 million loss reported in Q1 of 2016. The company is hoping that an acquisition will help in regaining profitability and also position the company to survive the uncertainties and tough terrain in the market.
Calpine stock closed the latest trading session on Thursday at 14.23.
