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Talen Energy Corp. agreed to be taken private by investment firm Riverstone Holdings LLC for about $1.2 billion, the energy company said Friday.

The private-equity firm, which focuses on energy and power investments, will buy all remaining shares of Talen that it doesn't already own. Riverstone owns roughly 35% of the shares outstanding of Talen Energy's common stock, which were issued in a June 2015 transaction that established Talen Energy by combining assets that had been owned by affiliates of PPL Corp. and affiliates of Riverstone.

Under terms of the deal, all shares outstanding of Talen Energy common stock not currently owned by Riverstone affiliated entities will be acquired for $14 a share in cash. Talen said that is a 56% premium over its closing price of $9 on March 31, the last trading day before "public reports" of a potential sale of Talen.

Shares of Talen rose 16% to $13.80 in premarket trading.

Talen and Riverstone expect to complete the transaction, subject to regulatory approval and a shareholder vote, by the end of the year.

The deal also includes a "go-shop" agreement, in which Talen may actively "solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals." The period will last for 40 days.

The deal includes a termination fee of $50 million, payable by Talen Energy to Riverstone in the event that the agreement is terminated for a superior proposal, but that would be reduced to $25 million if Talen Energy accepts a superior proposal made during the go-shop period.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

June 03, 2016 08:35 ET (12:35 GMT)

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