HOUSTON - Quantum (NASDAQ:QMCO) Capital Group, a significant player in the energy and energy transition industry, has agreed to purchase Cogentrix Energy from Carlyle (NASDAQ: CG) for an approximate sum of $3 billion. Cogentrix, an established independent power producer in the United States, operates 11 natural gas-fired power plants with a combined capacity of 5.3 gigawatts across strategic U.S. markets.
The transaction, which spans across the PJM, ERCOT, and ISO-NE regions, is poised to enhance the reliability and affordability of the U.S. electricity market. Cogentrix, headquartered in Charlotte, North Carolina, boasts a long-standing reputation for developing and managing a diverse portfolio of power generation assets.
Quantum's acquisition is a strategic move to capitalize on the growing demand for electricity spurred by advancements in technology and shifts in manufacturing. According to Quantum's CEO, Wil VanLoh, the current power market dynamics underscore the necessity for dependable infrastructure, which Cogentrix's assets are set to deliver.
The existing management team of Cogentrix, led by CEO John Ragan, will continue to steer the company post-acquisition. Quantum plans to expand Cogentrix's capabilities, focusing on gas-fired power generation, renewables, and battery storage to supply clean and reliable energy.
Carlyle expressed confidence that Cogentrix will thrive under Quantum's ownership, acknowledging the significant progress achieved during its tenure. Carlyle's Global Infrastructure team, particularly Pooja Goyal, highlighted the role of Cogentrix in balancing grid reliability with decarbonization goals, marking this divestiture as a successful venture within the energy sector.
The deal, which is contingent upon customary regulatory approvals, is anticipated to finalize between the fourth quarter of 2024 and the first quarter of 2025. Guggenheim Securities acted as Quantum's financial advisor, with King & Spalding and Vinson & Elkins providing legal counsel. Carlyle was advised by Lazard (NYSE:LAZ) on financial matters and Latham & Watkins on legal issues.
This acquisition is a testament to Quantum's extensive experience in managing over $27 billion in equity commitments and Carlyle's robust track record with $435 billion of assets under management as of June 30, 2024. The information for this report is based on a press release statement.
In other recent news, Carlyle Secured Lending (CGBD) has reached a definitive agreement to merge with Carlyle Secured Lending III (CSL (OTC:CSLLY) III) in a stock-for-stock deal. This merger is expected to increase CGBD's total assets to over $2.5 billion and net assets to more than $1.2 billion.
On another note, Discover Financial Services (NYSE:DFS) has agreed to sell its $10.1 billion private student loan portfolio to investment partnerships managed by Carlyle and KKR. The transaction is expected to conclude by the end of 2024.
Recent analyst notes reveal that Jefferies and TD Cowen have maintained a Hold rating on Carlyle, with Jefferies raising the price target to $45.00 and TD Cowen lowering it from $49.00 to $45.00. On the other hand, KBW has maintained a Market Perform rating and revised its price target to $48.00, while Oppenheimer maintained an Outperform rating, reducing its price target to $68.00.
In addition, Jefferies has highlighted Carlyle Group (NASDAQ:CG)'s ambitious $40 billion fundraising goal for 2024 and predicts an increase in share repurchase activities. These recent developments underline the dynamic nature of the financial sector and the ongoing strategic moves by Carlyle and Discover Financial Services.
InvestingPro Insights
As Quantum Capital Group sets its sights on acquiring Cogentrix Energy from Carlyle (NASDAQ: CG), investors may be evaluating Carlyle's financial metrics to understand the impact of this transaction. The adjusted market capitalization of Carlyle stands at $15.92 billion, reflecting the company's significant presence in the investment landscape.
InvestingPro data reveals a P/E ratio of -24.95, suggesting that investors are expecting future earnings growth despite the company currently not being profitable on a per-share basis. The adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly improved at -24.88. The PEG ratio, which measures the relationship between the P/E ratio and earnings growth, is notably low at 0.13 for the same period, indicating potential undervaluation if the company's earnings growth accelerates.
A key metric for investors is revenue growth, and Carlyle's revenue has seen a decline of 33.6% over the last twelve months as of Q1 2024. This contraction is further reflected in the quarterly revenue growth figure of -27.54% for Q1 2024. Despite this downturn, Carlyle maintains a healthy gross profit margin of 58.29%, underscoring its ability to manage costs effectively relative to its revenue.
InvestingPro Tips highlight the importance of considering dividend yields and growth as part of an investment decision. Carlyle offers a dividend yield of 3.17%, with a dividend growth of 7.69% over the last twelve months as of Q1 2024, which could be attractive for income-focused investors.
For those seeking more in-depth analysis, InvestingPro provides additional tips. Currently, there are 12 more InvestingPro Tips available that delve into other aspects of Carlyle's financial health and future prospects, offering valuable guidance for investors considering this stock in light of the recent acquisition news.
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