Energy
One Sector Is Keeping Dealmakers Busy Amid Coronavirus Gloom
(Bloomberg) — While dealmakers brace for a year of gloom and doom, a small pocket of the M&A world has been defying the downturn.
Investors are plowing billions of dollars into infrastructure assets, from waste-management businesses to electricity distributors, ignoring the turmoil roiling the markets. They see the sector, where assets have long-term contractual agreements with predictable cash flows, as immune to the impact of the coronavirus that’s crimping economic activity around the world.
KKR & Co.’s infrastructure arm announced this week it will buy the waste-management arm of U.K. utility owner Pennon Group Plc for $5 billion, one of the biggest deals since the pandemic hit. In Spain, Macquarie Group Ltd. agreed to acquire the remaining stake it doesn’t already own in Viesgo, an electricity distributor valued at 3 billion euros ($3.2 billion), Bloomberg News reported Wednesday.
Some of the biggest global investors — from BlackRock Inc. to Ontario Teachers Pension Plan — submitted initial offers in recent days for a stake in Abu Dhabi’s $15 billion gas pipeline network, according to people familiar with the matter. They’re now eagerly awaiting invitations to the next round of bidding.
The volume of infrastructure deals has increased to $73 billion so far this year, more than the $68 billion of transactions announced during all of the first quarter in 2019, according to data provider Preqin.
More deals could be on the way. Final offers are due soon for Portuguese highway operator Brisa, in what could become one of the largest European infrastructure deals this year, Bloomberg News has reported. Macquarie is also gauging interest in the British unit of its waste-management business, Wheelabrator Technologies Inc.
Even banks getting increasingly wary of lending for acquisitions seem more comfortable offering up financing for deals in the sector. KKR jumped in quickly with a formal offer for Pennon’s Viridor unit, lining up loan commitments early on and trouncing rival suitors who didn’t already have committed funding, people familiar with the matter said.
Not every part of the infrastructure world will hold up in a crisis: port operators and airports are expected to see muted throughput as travel and global trade slow down. But for now, the broader sector is offering a rare glimpse of hope to bankers.
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