Star makes £260m profit on first exit

European infrastructure specialist Star Capital Partners has sold Inexus, a UK provider of gas and electricity distribution networks, to Challenger Infrastructure Fund for £465m.

Star Capital Partners, the London-headquartered private equity firm with a preference for capital-intensive infrastructure investments, has achieved its first exit to date by selling Inexus, an independent UK gas and electricity transportation business, to Australian investor Challenger Infrastructure Fund for £465 million (€681 million; $836 million).

Inexus sources, develops and operates new gas and electricity connections mainly to residential properties in the UK. Star bought the business in August 2001 from Total, the French energy group, for £103 million. Under Star’s ownership, Inexus more than tripled the number of connections under management to over 450,000.

Having invested £18 million in the company originally, Star achieved proceeds of nearly £260 million on the disposal.

There will be similar opportunities going forward as more companies seek to disaggregate.

Tony Mallin, chairman, Star Capital Partners

The firm, which raised €581 million for its debut fund in 2001, specialises in what it describes as capital outsourcing. It aims to acquire underexploited capital sitting on a vendor’s balance sheet, leverage the asset and then build an independent business around it.

According to Tony Mallin, the corporate financier who founded Star in 2001, the Inexus exit constitutes a validation of the firm’s investment strategy. “This is a typical example of our capital outsourcing approach, and it is my view of the world that there will be many similar opportunities going forward, as more companies seek to disaggregate,” he said in an interview. 

Asked about Star’s fundraising plans, Mallin declined to comment. According to market sources, the firm is currently in the market looking to raise approximately €600 million of fresh capital.