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In golf, you don't want to be in the "tall grass." So far in 2019, the same rule applies to private equity's energy sector investments.

Driving the news: The Blackstone Group earlier this year invested $3.3 billion for a 44% stake in Tallgrass Energy, a Kansas-based midstream energy infrastructure company. But the stock has tanked since then, with Blackstone now opting to double down by offering to take over the entire company.

Tallgrass was the first investment out of Blackstone's debut infrastructure fund, which reportedly has secured over $12 billion in commitments (including a big slug from Saudi Arabia).

  • Tallgrass stock was at $24.18 just before the announcement. Yesterday it closed at $13.35 per share.
  • Reasons for the slide include missing Q2 earnings estimates on both the top and bottom lines, plus some investor concerns about potential conflicts related to Blackstone's original deal (in which it bought the GP, thus effectively controlling the LP in which it has a minority stake).
  • But, more broadly, it's been caught up in an overall energy sector slump. Even oil majors like Exxon Mobil and Royal Dutch Shell are down for the year.

Rather than cutting ties with Tallgrass, Blackstone is offering to take the company private for $19.50 per share. Tallgrass hasn't yet accepted the bid, saying it needs to first form an independent committee for consideration (Blackstone currently controls its board).

    • This isn't unique. Private equity firms ArcLight and Brookfield both offered to take over similar companies in which they had minority stakes via master limited partnership arrangements.

The bottom line: Blackstone bought into a bear market for energy stocks, despite the White House's much hyped deregulation. But rather than glumly head back into the clubhouse, it's pulling out another club, believing that its luck will improve if given enough time. Just like every amateur golfer ever.

Go deeper

Ben Geman, author of Generate
36 mins ago - Energy & Environment

What we’re watching during the final countdown to COP26

Illustration: Eniola Odetunde/Axios

This is shaping up as a critical week for climate policy in the U.S. and worldwide.

Driving the news: Democrats are in the final stages of trying to craft the big social spending and climate package they're trying to move on a thread-the-needle party-line vote.

"Atmospheric river" swings Northern California from drought to flood

Satellite view of the bomb cyclone swirling off the coast of the Pacific Northwest and the atmospheric river affecting California on Oct. 24. Photo: CIRA/RAMMB

A series of powerful "atmospheric river" storms are delivering historic amounts of rainfall across parts of drought-stricken California and the Pacific Northwest.

Why it matters: The atmospheric river, packing large amounts of moisture, was causing Northern California to whiplash from drought to flood, as it slowly moved south overnight. It's triggered widespread power outages, flooding and mudslides.

Facebook's pivotal week

Illustration: Aïda Amer/Axios

They're battening down the hatches at Facebook headquarters this week as the company faces a trifecta of tumult: a continuing wave of negative press coverage fueled by document leaks, a critical earnings report Monday and a reported name change looming.

The big picture: All this is unfolding as Mark Zuckerberg tries to transform Facebook from a social network into the prime mover behind a new "metaverse" of VR- and AR-driven remote work and play.