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AES Corporation (NYSE:AES) shares surged as much as 12% in premarket trading on Wednesday following reports that the renewable energy company is exploring strategic options, including a potential sale.
Infrastructure investors, including Brookfield Asset Management and BlackRock’s (NYSE:BLK) Global Infrastructure Partners unit have been studying the Arlington, Virginia-based company after its shares lost about half their value over the past two years.
With an enterprise value of approximately $40 billion, a leveraged buyout of AES will likely rank among the largest of all time.
AES Explores Strategic Options as Takeover Interest Looms
AES Corporation, a key renewable power provider to tech giants including Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN), is actively exploring strategic alternatives amid significant takeover interest from major infrastructure investors.
The company owns an extensive fleet of renewable power assets, including wind and solar facilities, as well as two utilities in Indiana and Ohio, positioning it as a crucial player in the growing data center energy market. Infrastructure heavyweights Brookfield Asset Management (TSX:BAM) and BlackRock’s Global Infrastructure Partners unit have been closely studying AES as potential acquisition targets, drawn by the company’s renewable energy portfolio and long-term contracts with technology customers.
The timing of this potential deal activity reflects broader market dynamics, as investors are betting heavily on the immense computing power needed for artificial intelligence and cryptocurrency mining to fuel demand for renewable energy providers.
This year has already seen significant dealmaking in the sector, with Blackstone (NYSE:BX) agreeing to take TXNM Energy (NYSE:TXNM) Energy private for $11.8 billion and Constellation Energy (NASDAQ:CEG) reaching a deal to acquire Calpine Corp for $16.4 billion. However, AES faces challenges in presenting a simple investment story due to its sprawling operations and dual ownership of both utilities and power plants, which complicates its valuation compared to more focused peers in the US power sector.
While no certainty exists that any suitors will pursue a deal for AES, the company’s strategic review comes at a time when its stock has been under pressure due to President Trump’s anti-renewable policies, including permitting restrictions, higher tariffs, and a rapid phaseout of clean energy credits.
Despite these headwinds, AES has been reducing its international scope and pivoting toward developing mostly renewable energy assets, making it an attractive target for infrastructure investors seeking exposure to the growing demand for clean energy in the data center sector.
AES Stock Gains in Premarket
AES shares closed regular trading Tuesday at $11.07, down 3.9% for the day, but surged to $12.55 in premarket trading Wednesday morning (as of 7:19:47 AM EDT), representing a significant 13.32% gain or $1.48 increase from the previous close.
The premarket surge reflects investor optimism about the potential strategic alternatives being explored by the company, with the stock jumping as much as 12% following the initial reports of takeover interest. This represents a notable reversal from the stock’s recent poor performance, which saw shares drop 38% over the past 12 months and lose about half their value over the past two years.
The company currently trades with a market capitalization of $7.9 billion based on Tuesday’s closing price, while its enterprise value stands at approximately $40 billion when including debt. Key financial metrics show AES trading at a price-to-earnings ratio of 6.02 based on trailing twelve months earnings per share of $1.84, with the stock’s 52-week range spanning from $9.46 to $20.30.
The company maintains a forward dividend yield of 6.62% with a quarterly dividend of $0.70, and analysts have set a one-year target estimate of $13.67 for the stock.
Despite facing headwinds from the current administration’s anti-renewable policies and missing analyst estimates in its first quarter earnings report, AES’s strategic position as a renewable energy provider to major tech companies positions it well for potential M&A activity.
The company’s beta of 0.94 indicates it moves roughly in line with the broader market, while its average trading volume of 16.7 million shares suggests adequate liquidity for institutional investors considering large positions or potential buyout scenarios.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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