Private equity firm KKR has agreed to purchase power generation company ContourGlobal in a $2.16 billion deal aimed at enhancing its presence in renewable energy.
The deal is likely to be completed, given the backing of ContourGlobal’s largest shareholder, Reservoir Capital, which holds just over 70% of the company. “The board of ContourGlobal believes that the offer provides an opportunity for all shareholders to crystallize their investment in ContourGlobal at an attractive price,” said chair Craig Huff.
The £1.75 billion offer values it at 2.5 times adjusted EBITDA, using last year's cash profit of £679 million ($842 million).
KKR will pay 263.6 pence ($3.29) per share of the London-listed company, which runs 138 thermal and renewable power plants in Europe, Latin America, North America, and Africa.
KKR said the business was attractive because of its "highly contracted and inflation-protected cash flow streams" and sales to "investment grade counterparties." KKR currently has investments in infrastructure, including utilities, transportation, water, communications, and renewables.
"KKR believes it can support ContourGlobal . . . which aims at a meaningful 40% reduction of CO2 emissions intensity by 2030, and to be net-zero carbon by 2050," KKR said in a statement. The private-equity powerhouse also said it would not seek to make any major changes to ContourGlobal outside of getting rid of public company-related roles and potentially shutting its London office.
Lately, due to the perceived cheapness of companies, London has become a focus for private equity giants like KKR. Last year, in a similarly-sized deal, KKR bought out infrastructure specialist John Laing Group, and more recently it has reportedly been in talks to buy UK Power Networks, which is currently owned by Hong Kong billionaire Li Ka-shing and distributes power to 8 million homes.
Many have been bullish about ContourGlobal’s prospects, given its 2021 numbers and the state of the power markets – apparently KKR is, too.