The energy and power supplier Talen Energy (TLN) is taking a leap today after Riverstone Holdings, the main stockholder which holds 35% of the company, offered to buy the remaining 65% at a price of $14 per share, and delist the stock. As a reminder, just a year ago Riverstone pushed to separate TLN from its parent company via spin-off.

In the past there were concerns that Riverstone will sell its position in the stock, but as I assumed it was foolish to do so. Now, Riverstone is doing the exact opposite – it acquires a quality and profitable electrical manufacturer traded at 5.4 EV/EBITDA and a Price/Free cash flow of 5.1. This is a purchase of TLN for FREE! TLN is worth much more than the current price, perhaps even double.

So, what to do? In cases of a Buyout offer, there is a risk that the proposal will not be accepted, in which case the stock might go back down to the pre-offer price. In such case, being that TLN is very cheap, in my opinion this is less likely. The question is whether there is an upside for a share that is over $14?

First, TLN now has 40 days to seek out a better purchase offer. There are other companies that may be interested in acquiring TLN at its current price, but it is not certain that this 40 day period is sufficient time for this. On the other hand, the media has already published the names of a number of advocate companies which intend to investigate whether the company’s management is operating contrary to the interests of the investors (and it is clear that it is NOT so, in light of the ridiculous pricing of the transaction). Past experiences show that such investigations can bear fruit, maybe even completely torpedo the deal, so at least have Riverstone pushed to offer a higher price.

Bottom line: in my opinion, it makes sense to continue to hold the stock and wait patiently for 40 days until the completion of the purchase offer, which is what I intend to do. Who knows, maybe the price in the proposal will improve, and as stated I do not see a down side to the current situation. Meanwhile, TLN is up 127.5% from the price it was bought to the spin-off portfolio so I’m already satisfied with this spin-off investment.