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On 17 May 2022, ContourGlobal plc and Cretaceous Bidco Limited, a newly formed company wholly-owned by funds advised by Kohlberg Kravis Roberts & Co. L.P. (KKR) and its affiliates, that they have reached agreement on the terms and conditions of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of ContourGlobal by KKR. This is the latest transaction in a string of private equity purchases of UK-listed companies. 

UK public companies have increasingly been targeted by large private equity firms due to their competitive valuations and US-based KKR is the most recent to benefit, agreeing an all-cash deal for the FTSE 250 power generation company in an attempt to expand its presence in the renewable energy market. The deal, which values ContourGlobal at £1.75bn, has garnered the support of shareholders, who are set to receive £2.63 per share under the terms of the offer, with irrevocable undertakings to support the deal amounting to 72.8% already. KKR needs 75% shareholder support in total but with ContourGlobal directors set to recommend the offer, which represents a 36% premium, the deal appears to be a fait accompli.

Commenting on the Acquisition, Craig A. Huff, Chairman of the Board of ContourGlobal, :

‘ContourGlobal is an outstanding business with a strong portfolio of assets. The management team of ContourGlobal and our employees have delivered an excellent track record of developing and operating the portfolio, and notwithstanding the strong prospects for the business, the Board of ContourGlobal believes that the offer provides an opportunity for all shareholders to crystallise their investment in ContourGlobal at an attractive price. The Board of ContourGlobal welcomes KKR's intention to provide capital and operational expertise to support ContourGlobal's strategy, including accelerating investments in the energy transition.’

ContourGlobal owns and operates 138 thermal and renewable power plants across 20 countries throughout the Americas, Africa and Europe, utilising a wide range of fuel types, technologies and equipment. The company’s differentiated business model combined with a strong operational performance, flexible and agile corporate strategy and an efficient capital structure has enabled ContourGlobal to deliver superior project level returns and growth. KKR, who is seeking to expand its portfolio of power and infrastructure investments and increase its presence in the renewable energy market, have said that they would not be making any major changes to ContourGlobal.

Ryan Miller, Director at KKR, :

‘As a long-term global investor in critical energy infrastructure, KKR will work with ContourGlobal's management team and provide the capital needed to expand its portfolio of assets, building on ContourGlobal's leading global footprint and operational track record. We will draw on our global platform, resources and extensive experience as an active investor in a diverse range of energy sources, including renewables, to help drive value creation in a complex portfolio.’

ContourGlobal shares skyrocketed 32.9% following the announcement on 17 May 2022 reaching £2.57 per share and a market capitalisation of £1.68bn, a four-year high for the company and just shy of the offer price.

London has become a focus for private equity giants like KKR given the competitive valuations of UK public companies compared to other markets (see: Private equity pounces on UK companies in recent takeover bids). KKR itself FTSE 250 infrastructure specialist John Laing Group plc last year in a £2bn deal, (see: Foreign bidders snap up the FTSE Main Market). More recently, HG Pooled Management Ltd a £1.06bn acquisition of software company Ideagen plc and DBAY Advisors Limited submitted a higher competing for CareTech Holdings plc (see: DBAY’s possible offer sparks race to take CareTech Holdings plc private).

In our Trends in Public M&A in Q1 2022—Market Tracker Trend Report, we noted that private equity buyers accounted for four (33%) of the 12 firm offers in Q1 2022, which has crept up to 37% at the time of writing. Private equity was the story of the year in 2021 during which 34 (64%) of the 53 firm offers announced were public to private transactions made by bidcos backed by private equity, financial investors and/or individuals who spent, in aggregate, £41.1bn snapping up UK public companies. Given the increasing appetite for assets from private equity buyers, the private equity raid on UK-listed companies is expected to continue in 2022.

Market Tracker will continue to monitor this transaction as it develops.