An IPO would probably have needed to price the shares at a discount to peers with longer histories as listed companies
Private equity shops, saddled with companies they bought but don’t want to hold on to forever, are getting creative with their exit plans. Take the owners of US power producer Calpine. They just agreed to sell to Constellation Energy for $16.4bn plus net debt, with the equity part made up of $4.5bn in cash and 50mn of the buyer’s shares.
It would have probably only been able to float between 15-30 per cent of Calpine, though, and would probably have needed to price the shares at a discount to peers with longer histories as listed companies. The real winner here is Constellation, whose shares rose 24 per cent on Friday — a rare outcome for a company announcing a big takeover. Even though it didn’t give any numbers on potential cost savings, the market is pricing in a heap of value creation.
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