Morgan Stanley consortium buys €800m Gas Natural assets

Morgan Stanley Infrastructure and Portuguese energy group Galp Energia have purchased Gas Natural’s Madrid distribution network for €800m. The deal is expected to close in the first half of 2010 with 11 banks providing debt.

A consortium comprising Morgan Stanley Infrastructure and Portuguese energy group Galp Energia has acquired Gas Natural’s Madrid gas distribution network for €800 million debt-free.
 
The Spanish utility expects to make a pre-tax capital gain of €380 million from the sale, which represents an earnings before interest, tax, depreciation and amortization (EBITDA) multiple of 10.5x in relation to its estimate for this year.  Financial close is scheduled for the first half of 2010, subject to approval from the relevant authorities. Banesto, BNP Paribas, Banco Sabadell, Banco Popular, Caja Madrid, Espírito Santo Investment, Calyon, Commerzbank, Helaba, La Caixa and Santander will provide debt for the deal.
 
The deal includes the purchase of 504,000 distribution points covering most of the municipalities surrounding the centre of Madrid. Galp Energia had already purchased some 248,000 distribution points in Murcia and Cantabria, in the south and north of Spain respectively, from Gas Natural earlier this year for €339 million. The Madrid sale attracted strong interest from several private equity firms and funds said to include Carlyle, CVC Capital Partners, Spain’s Magnum Capital, Italy’s Valiance and one of the infrastructure funds managed by Macquarie.
 
For Gas Natural, the sale represents the completion of its agreement with the Spanish competition authority to sell 9 percent of its Spanish network after it acquired utility Union Fenosa earlier this year for €17 billion. But Gas Natural’s recent sales – which also include the divestment of a Colombian utility in October – are also a part of an effort to cut net debt to €18 billion from close to €22 billion at the end of September. To date, the Spanish utility has sold over €3 billion in assets.
 
CaixaBI provided financial advice to Galp Energia with Garrigues providing legal counsel. Morgan Stanley Infrastructure received financial advice from Espírito Santo Investment, Morgan Stanley and Santander with Uría Menéndez as legal advisor and PricewaterhouseCoopers as strategic advisor. Clifford Chance acted as legal advisor to the bank group.