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Morgan Stanley sells Spanish gas grid for €1.25bn

PGGM has teamed up with EDF and Gingko Tree Investment to buy Madrileña Red de Gas at a time when the US fund manager is seeking to cash in on assets held in its maiden fund.

Morgan Stanley Infrastructure (MSI) has sold Spanish gas network Madrileña Red de Gas (MRG) to a consortium formed of Dutch pension administrator PGGM, French utility EDF and China’s Gingko Tree Investment.

Neither the value of the transaction nor the respective stakes of each consortium member were disclosed but reports place the price tag paid by the trio at €1.25 billion. They will together own 100 percent of the company.

The acquisition, financed through equity only, is expected to close in May. Both PGGM and Morgan Stanley declined to comment further on the price and structuring of the deal.

The second-largest gas distributor in Madrid and the third-largest in Spain, MRG operates some 5,500 kilometres of pipelines. It generated an EBITDA of €149.2 million last year. MSI originally formed the company through buying gas networks associated with 505,000 connection points in 2010 and 303,000 connection points the following year.

The winning offer this time round trumped rival bids by consortia comprising Toronto-based Canada Pension Plan Investment Board, German insurer Allianz and Abu Dhabi Investment Authority on the one hand and Canada’s Public Sector Pension Investment Board and London-based Arcus Infrastructure Partners on the other.

The exit will come in handy for MSI at a time when it is raising its latest fund, Morgan Stanley Infrastructure Partners II, which has a target of $4 billion. The vehicle reached a first close in June 2014 on $1.5 billion.

Last month, the firm divested 100 percent of Montreal Gateway Terminals to a consortium formed of Fiera Axium Infrastructure II, Manulife, Fonds de solidarite FTQ, Industrial Alliance, and Desjardins Group. In February, it also emerged that MSI was looking to sell Southern Star, a 6,000-mile US pipeline it first invested in through its maiden fund in 2010.