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US private equity group buys UK power plant giant for £1.75bn

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ContourGlobal operates across Europe, the Americas and Africa with fossil-fuel power plants, hydro-electric plants and wind and solar farms
  • ContourGlobal owns 138 power plants globally
  • KKR has $479 billion of assets under management

ContourGlobal, the UK power plant owner, has agreed to be taken over by KKR, the New York-based private equity giant, for £1.75 billion after an underwhelming four-and-a-half-year stint on the public markets.

The FTSE 250 company said its board intended to recommend the “fair and reasonable” all-cash acquisition at 263.6p a share, a 36 percent premium to Monday’s closing price, sending shares surging by 32.9 percent to 257p yesterday.

ContourGlobal owns 138 power plants across Europe, the Americas and Africa, with a total capacity of 6.3 gigawatts. It operates both fossil-fuel power plants burning gas, coal and oil, and renewable generation including hydro-electric plants and wind and solar farms. It reported revenues of $2.2 billion and net profits of $80 million last year.

The company was founded in 2005 by Joseph Brandt, who remains its chief executive, and Reservoir Capital Group, which is its controlling shareholder with a 71.36 per cent stake. 

ContourGlobal said the share price performance, which “significantly undervalues the business”, had occurred despite its “strong growth track record, operational excellence, robust financial performance and shareholder returns. It said it believed this underperformance reflected “the limited trading liquidity in ContourGlobal shares in part as a result of Reservoir Capital’s maintained large shareholding in the company”. Reservoir Capital has made an undertaking to vote in favour of the takeover.

KKR has pioneered leveraged buyouts, and has $479 billion of assets under management globally. It said ContourGlobal was “a compelling platform for significant future organic and inorganic value-accretive growth”.

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