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GIP portfolio company launches IPO

Chesapeake Midstream Partners is looking to sell between 15% and 17% of the company, half-owned by GIP, to public investors on the New York Stock Exchange. The listing could give the company a total market value of close to $2.8bn.

Chesapeake Midstream Partners, a 50-50 joint venture between fund manager Global Infrastructure Partners and natural gas producer Chesapeake Energy, has launched an initial public offering on the New York Stock Exchange.

The company said in a statement it will seek to sell 21,250,000 common shares and give its underwriters an option to sell an additional 3,187,500 shares.  The proceeds from the optional sale would go to Global Infrastructure Partners (GIP).

A person familiar with the offering said the shares are expected to price between $19 and $21 per share. Pricing is expected to happen Wednesday evening and shares are expected to begin trading on the New York Stock Exchange under the symbol “CHKM” Thursday morning, the person said.

If the shares price at the mid-point of the expected range, Chesapeake Midstream Partners could raise about $425 million. That would be about $80 million more than the $345 million the company originally said it was looking to raise in an IPO. And, given that the sale would represent only between 15.1 percent and 17.3 percent of the equity in the company, it would value Chesapeake Midstream Partners at approximately $2.8 billion.

GIP invested $588 million for a 50 percent interest in Chesapeake Midstream Partners in September 2009, with Chesapeake Energy owning the other half. The transaction created a new joint venture that owns several of Chesapeake’s natural gas gathering and processing assets in the US and has a 10-year service contract with Chesapeake.

The deal marked GIP’s second investment in the natural gas sector in 2009, after it committed up to $700 million to a joint venture that will build the Ruby Pipeline, a 675-mile natural gas pipeline in the Western US.

UBS, Citigroup Global Markets and Morgan Stanley are acting as joint book-running managers for Chesapeake Midstream Partners’ initial public offering.