What happened

Shares of Tallgrass Energy (NYSE:TGE) rocketed nearly 35% by 10:15 a.m. EDT on Wednesday. Fueling the pipeline company's rally was a proposal by private equity giant Blackstone (NYSE:BX) to take it private.

So what

Blackstone has offered to acquire all the shares of Tallgrass Energy that it doesn't currently own for $19.50 apiece. That price implies a nearly 36% premium to yesterday's closing price. The deal would give Blackstone and its partners full control over Tallgrass Energy.

Two people shaking hands with pipelines in the background.

Image source: Getty Images.

Blackstone initially acquired a 44.2% stake in the company earlier this year, paying $3.2 billion to buy out several private minority owners. The company now wants to buy the rest of Tallgrass from its public-market investors.

That will enable Tallgrass to operate outside of the public market, which isn't giving it any credit for its dividend or growth prospects. As a private company, Tallgrass Energy will be free to pursue its expansion projects without the market worrying about how it might finance them. Now it can not only reduce its cash distributions without punishment but also tap into Blackstone's funding capabilities.

Now what

Given that Blackstone already owns a large stake in Tallgrass and is offering a hefty premium, this looks like a done deal.

The transaction is one of a growing number of take-private transactions in the energy sector, which will likely continue given that valuations in the midstream space remain depressed. That positions the buyers to potentially cash in when market conditions improve.

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