GIP pays $1.8bn for major midstream asset in Texas

Jefferies is providing $725m of stapled debt to finance the deal, which is being done through GIP’s $15.8bn third infrastructure fund.

Global Infrastructure Partners has agreed to purchase the largest privately held crude oil transportation system in the Midland Basin of West Texas in a deal worth $1.82 billion.

The fund manager is buying Medallion Gathering and Processing, which runs more than 800 miles of pipelines and a newly constructed gathering and transportation system, through its $15.8 billion GIP III fund. Investment bank Jefferies is providing GIP with $725 million of stapled debt financing to help fund the $1.82 billion deal.

In addition to the purchase price, there may be an additional consideration tied to GIP’s realised profits at exit, though the manager stressed “there can be no assurance as to when and whether the additional consideration will be funded”.

The Energy & Minerals Group, a private equity firm investing in upstream and midstream energy assets, and oil and gas developer Laredo Petroleum sold 51 and 49 percent stakes respectively.

“This acquisition underscores GIP’s long-term partnership approach and strategy of investing in superior-quality platforms that deliver the highest level of customer service,” said Adebayo Ogunlesi, GIP chairman.

GIP’s Medallion deal is the third investment from GIP III Infrastructure Investor has reported on. In August, the firm paid DONG Energy close to €1.2 billion for a 50 percent stake in a 450MW German offshore wind farm. In September 2016, GIP agreed to pay €3.8 billion for a 20 percent stake in Gas Natural, one of the largest energy infrastructure companies in the world.

GIP III closed in January as the largest unlisted infrastructure vehicle ever raised. The fund is targeting a net IRR of between 12 percent and 15 percent, charging a 1.75 percent management fee on committed capital and investment commitments thereafter, according to US pension documents. The vehicle has a 20 percent carried interest and an 8 percent hurdle rate. It will have a five-year investment period and a 10-year duration, with four possible one-year extensions.

Jefferies and Wells Fargo acted as financial advisors to Medallion. Locke Lord acted as legal counsel to Medallion, Akin Gump Strauss Hauer & Feld acted as legal counsel to Laredo and White & Case acted as legal counsel to GIP.