GIP pockets nearly $6bn on Access sale

Williams Partners, a US pipeline operator, is set to gain control of the gas services business by acquiring GIP's remaining stake.

Global Infrastructure Partners (GIP) has sold its remaining stake in Access Midstream Partners to existing shareholder Williams Partners, a US gas pipeline business, for $5.995 billion.

Under the agreement, Williams will acquire a 50 percent general partner interest and 55.1 million limited partner units in the Oklahoma City-based company from GIP's Fund II, which will allow it to gain full control of Access.

At close of trading on Friday, June 13, the 55.1 million LP units had a market value of $3.6 billion, Williams said in a statement.

Access, originally Chesapeake Midstream Partners, was founded as a joint venture between GIP and oil and gas company Chesapeake Energy in 2009. In July 2012, GIP bought out the joint venture and changed its name to Access Midstream Partners. The firm then sold a 50 percent GP interest and a 23 percent LP interest to Williams in December 2012.

Access still provides midstream services to Chesapeake Energy, Total USA, Mitsui & Co., Anadarko Petroleum, Statoil and other producers under long-term fixed-fee contracts, according to a SEC filing.

Williams said it will fund about half of the purchase with equity and the remainder with a combination of long-term debt, revolver borrowings and cash on hand. The company expects to close the deal in the third quarter of this year.

“We are extremely excited about the business access and the extremely talented team [at Access Midstream],” said Williams’ chief executive officer Alan Armstrong during a conference call, calling the deal “not just a great financial play, but a long-term strategic play if you believe in natural gas super-cycle.”

Despite a relatively bearish outlook this year, the US market offers brighter prospects in the longer term thanks to US liquefied natural gas (LNG) exports, more stringent EPA rules (which should benefit gas demand in the power sector), stronger industrial gas demand, and higher exports to Mexico, Morgan Stanley said in a recent note. Near-term downside risks include significant pipeline and processing infrastructure coming online in the second half of this year.

To complete its transition to a pure-play GP holding company, Williams plans to accelerate the drop-down of remaining NGL & Petchem Services assets and projects to late 2014 or early 2015. In addition, Williams proposed a merger with Access Midstream, which, if carried out, is expected to create 2015 adjusted EBIDTA of about $5 billion, and annual LP distribution growth rate of between 10 and 12 percent through 2017, according to the statement.