Talen Energy, an energy and power generation company, entered into a definitive merger agreement with affiliates of Riverstone Holdings, a private investment firm. The transaction has a total enterprise value of approximately $5.2 billion.

Under terms of the merger agreement, all outstanding shares of Talen Energy common stock not currently owned by Riverstone affiliated entities will be acquired for $14.00 per share in cash, which represents a 56% premium to the closing price of $9.00 per share on March 31, 2016.

The consideration for the common stock in the transaction, of approximately $1.8 billion, is expected to be funded by a conversion of Riverstone’s existing ownership of 35% of the common stock of Talen into shares of the surviving corporation, Talen Energy’s cash on hand, and proceeds of a $250 million new secured term loan.

The new secured term loan is fully committed by Goldman Sachs Bank USA, Royal Bank of Canada, Barclays Bank, Credit Suisse and Credit Suisse Securities (USA), Deutsche Bank Securities and Deutsche Bank New York Branch, Morgan Stanley Senior Funding and the Bank of Tokyo-Mitsubishi UFJ and will rank pari-passu with the existing first lien revolving credit facility of Talen Energy Supply (a wholly owned subsidiary of Talen Energy), which will be reduced from $1.85 billion to $1.4 billion upon closing of the transaction.

Concurrently with the signing of the merger agreement, all of Energy Supply’s subsidiaries that currently guarantee its revolving credit facility have executed guarantees (effective as of the closing of the transaction) of Talen Energy’s outstanding unsecured notes due 2025 and its Pennsylvania Economic Development Financing Authority revenue bonds, which together comprise approximately $831 million of Energy Supply’s approximately $3.3 billion total unsecured debt that will remain outstanding. As a result of this new credit support for the 2025 notes and the municipal bonds, it is expected that these notes and bonds will be structurally senior to the non-guaranteed unsecured debt of Energy Supply, and we believe that the issue ratings on the 2025 Notes and the municipal bonds will be maintained or improved.

Citi is serving as financial advisor to Talen Energy. Kirkland & Ellis is serving as Talen Energy’s legal advisor. Goldman, Sachs and RBC Capital Markets are serving as financial advisors to Riverstone. Wachtell, Lipton, Rosen & Katz and Vinson & Elkins are serving as Riverstone’s legal advisors for the transaction.