The Competition and Markets Authority has just announced that it is investigating the anticipated acquisition by the overseas investors consortium of Macquarie Infrastructure and Real Assets (Europe) Ltd and British Columbia Investment Management Corporation of a 60% shareholding in the gas transmission and gas metering business of National Grid Gas plc.
National Grid announced in March 2022 that it had agreed to sell a 60% equity interest in its UK gas transmission and metering business. Commenting at the time, John Pettigrew, Chief Executive of National Grid, said:
“This transaction further enhances our role in delivering the UK’s energy transition, pivots our portfolio towards electricity, whilst ensuring the security of the energy supply for the country. Alongside our plans to invest up to £35 billion in energy infrastructure over the next five years, the series of transactions announced last March will strengthen our long-term growth prospects, and drive long-term value for shareholders.”
The acquisition would see global asset manager Macquarie, the world’s largest infrastructure manager, and BCI, one of Canada’s largest institutional investors take a majority interest in a key provider of the UK’s critical national infrastructure.
National Grid Gas owns and operates the regulated gas National Transmission System (NTS) in Great Britain. As both the transmission owner and system operator, NGG owns, builds and operates the high-pressure NTS with day-to-day responsibility for balancing supply and demand in real time and facilitates the connection of assets to the transmission system.
The National Grid Gas transmission network comprises approximately 7,660 kilometres of high-pressure pipe and 23 compressor stations connecting to 8 distribution networks and other third-party independent systems.
The CMA has launched its investigation in response to a merger notice issued by Luppiter Bidco Ltd – the company is a wholly owned subsidiary of a consortium between Macquarie Infrastructure and Real Assets (Europe) Ltd), controlled by Macquarie Group Ltd and British Columbia Investment Management Corporation - the Macquarie-BCI Consortium.
The terms of the deal imply an enterprise value for National Grid of approximately £9.6 billion - following the transaction, National Grid would own a 40% minority equity interest via a new holding company called GasT TopCo.
As at March 2022, National Grid’s regulated asset value is estimated to be approximately £6.6 billion and its net debt is estimated to be approximately £3.8 billion.
National Grid has also entered into an option agreement with the consortium for the potential sale of the remaining 40% of equity in GasT TopCo - the option may be exercised by the consortium between 1 January 2023 and 30 June 2023.
In August 2021 Macquarie acquired a majority stake in Southern Water, followed by a £120 million debt investment in Anglian Water’s holding company . In 2017 it sold its stake in Britain’s biggest water supplier, Thames Water.
The UK Competiotion and Markets Authority is now considering whether:
- it is, or may be the case, that the transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002.
- ii. if so, whether the creation of that situation may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
The CMA is now seeking comments on the proposed merger – deadline to submit responses is 11 October 2022.
Current statutory deadline for the CMA to reach its initial phase 1 decision on whether to refer the merger for a Phase 2 investigation is 22 November 2022 – this may however be subject to change.
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