Fundraising

Morgan Stanley sells Southern Star

MSI has agreed to sell the natural gas pipeline to La Caisse and GE Financial Services, making Southern Star the fourth asset Morgan Stanley’s infrastructure platform has sold within the past five months.

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Morgan Stanley Infrastructure (MSI), the infrastructure investment platform of the Wall Street investment bank, has agreed to sell Southern Star, a natural gas transmission and storage system, to a consortium comprising La Caisse de dépôt et placement du Québec and GE Energy Financial Services, for an undisclosed amount.

MSI had first invested in Southern Star Capital Corporation – owner and operator of the nearly 6,000-mile interstate pipeline and network of eight underground storage fields – in March 2010, acquiring a 40 percent stake through Morgan Stanley Infrastructure Partners (MSIP), its maiden infrastructure fund that closed in 2008 on $4 billion. MSI acquired the remaining 60 percent in August 2012.

“The strong working relationship between Morgan Stanley Infrastructure and Southern Star’s senior management over the past five years has served to focus the company on continued operational excellence, while at the same time seeking out new customers and markets for the system,” MSI’s head of Americas investing John Veech, said in a statement. “As a result, we created significant value at Southern Star.”

The company has facilities and employees in eight states and serves utility, municipal, commercial, industrial and power generation customers in the US Midwest.
Canadian pension La Caisse did not disclose details of the deal structure and declined to comment further.

It did however issue a separate statement explaining its reasons for the acquisition.

“For La Caisse, this is a high-quality asset that is strategically located,” La Caisse senior vice president, infrastructure Macky Tall said. “The integration of its infrastructure in the local distribution companies makes [Southern Star] a leading company in its market,” he added.

Southern Star is the fourth asset MSI has proceeded to sell since the beginning of the year. The others include Spanish gas network Madrileña Red de Gas, container terminal Montreal Gateway Terminals and UK rail rolling stock company Eversholt Rail – investments made through MSIP I.

MSI is already in the process of raising its second infrastructure fund which also has a target of $4 billion. The vehicle reached a first close in June 2014 on $1.5 billion but has not disclosed an updated figure since then.

The firm declined to comment.