What happened
Shares of Tallgrass Energy (TGE) surged more than 20% by 11:15 p.m. EST on Tuesday. Driving the energy stock's rally was a sweetened offer to take it private.
So what
Last August, private equity giant Blackstone Group (BX) offered to acquire all the outstanding shares of Tallgrass Energy that it didn't already own for $19.50 apiece. That implied a nearly 36% premium to the company's closing price the day before and 12% above where shares had traded over the previous 30 days.
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Investors, however, thought the deal looked light since it was at a slight discount to what Blackstone paid for its initial 44% stake in Tallgrass earlier in the year. Furthermore, they didn't like the fact that there was a provision in the deal for management to get an additional 30% premium for their shares, which they said was compensation needed for retention.
In response, Blackstock has increased its offer to public shareholders to $22.45 per share. That price represents a 15.1% premium to its initial proposal and is 22.7% above the stock's closing price yesterday.
Now what
Tallgrass Energy's board has accepted this higher offer from Blackstone. As a result, the deal should close by the second quarter of next year. Also, as part of the agreement, Tallgrass will stop paying its high-yielding dividend. Thus, income investors might want to cash out now since shares are trading very close to Blackstone's offer and consider reinvesting their proceeds into one of these high-yielding stocks.
