KKR creates joint venture for $1.2bn US midstream acquisition

KKR has teamed up with US midstream specialist Williams Partners to acquire natural gas services company Discovery Midstream for $1.2 billion.

The joint venture between KKR and Williams Partners is the result of an agreement to purchase 100 percent of the Dallas-based natural gas systems operator from private equity firm TPG Growth. According to a statement, KKR’s “initial economic contribution” is 60 percent of the deal’s $1.2 billion value, while Williams Partners put up the remaining 40 percent.

However, Oklahoma-based Williams Partners said it will operate Discovery’s natural gas pipelines, storage and processing facilities, in addition to future capital requirements, taking its stake in the business up to 50 percent.

Founded in 2015, Discovery operates natural gas systems across 250,000 acres in the Denver-Julesburg Basin in Colorado. Its operations are expected to fully enter service at the end of this year.

KKR said it funded its part of the deal through its energy and infrastructure platform but declined to name specific funds. On the firm’s Q2 earnings call last week, KKR chief financial officer William Janetschek said KKR Global Infrastructure Investors III, which is reportedly set to close soon on more than $7 billion, will begin its investment period in Q3.

He said there were deals signed for this fund which had not yet closed and that the number of “signed-but-not-yet-closed transactions for infrastructure, looking out probably over the next three months, is going to be roughly $600 million of equity”.

Last month, Infrastructure Investor reported that a combination of Funds II and III were used to buy a 49.99 percent stake in more than 10,000 telecom towers owned and managed by the French company SFR, a subsidiary of Dutch telecom giant Altice.

KKR divests Spanish car park asset

The announcement of the new joint venture with Williams Partners comes on the same day KKR said it had sold its 18.2 percent stake in Saba Infraestructuras to Criteria Caixa, the car park operator’s existing majority shareholder.

KKR did not disclose financial details of the sale nor the price it paid when it first invested in the company in 2011, acquiring a 12.5 stake initially through Fund I. A year later, it increased its ownership interest to 18.2 percent.

“Since its investment, KKR has supported Saba’s international growth through expansion into Portugal, Italy, and Chile, and has helped Saba exit its logistics parks businesses to focus on winning and extending contracts in its car parking business,” KKR said in a statement.

According to meeting documents published by the Suffolk Pension Fund last December, KKR’s investment in Saba Infraestructuras is “not expected to be marked up from the current valuation,” which the pension listed at an expected 1.8 times multiple of capital and an 11.9 percent internal rate of return.