THE WALL STREET JOURNAL: Shell to Sell InterGen Utility To Private-Equity Groups: “Shell is also close to agreeing on a buyer for Basell, a chemicals joint venture with BASF AG of Germany, for as much as $7 billion…”: “Shell is working to fulfill a promise made to investors last September to unload as much as $12 billion in businesses by the end of next year to refocus its operations in the wake of its reserves-accounting scandal last year.” (ShellNews.net) Posted 20 April 05
By DENNIS K. BERMAN and JASON SINGER
Staff Reporters of THE WALL STREET JOURNAL
Royal Dutch/Shell Group agreed to sell its InterGen NV power-plant business to the private-equity arms of American International Group Inc. and the Ontario Teachers' Pension Plan for $1.75 billion, the latest move in the oil giant's effort to shed noncore assets.
Shell is also close to agreeing on a buyer for Basell, a chemicals joint venture with BASF AG of Germany, for as much as $7 billion, people familiar with the matter said. The two owners are weighing competing bids from Iran's National Petrochemical Co. and Indian consortium including Haldia Petrochemicals.
Shell is working to fulfill a promise made to investors last September to unload as much as $12 billion in businesses by the end of next year to refocus its operations in the wake of its reserves-accounting scandal last year. Among other units Shell is looking to sell is its British liquefied petroleum-gas unit
The sale of the Burlington, Mass.-based InterGen includes 10 power plants in the United Kingdom, the Netherlands, Mexico, the Philippines, China, and Australia. Shell owns 68% of InterGen, with the rest belonging to Bechtel Group.
Shell and Bechtel plan to keep other power-generation facilities in the U.S., Colombia, and Turkey, the companies said in a statement.
The deal highlights two trends hitting the financial markets.
Shell , along with many of its Big Oil peers, have been dumping noncore assets to focus on developing new oil reserves and returning cash to investors.
And private-equity firms have emerged as nimble, well-organized and well-funded market players, eager to put their money to work acquiring even utilities, which were once considered the epitome of highly regulated, staid businesses that financial buyers avoided.
The Teachers' Private Capital fund and the AIG affiliate, Highstar Capital, emerged victorious after a long-running auction that included among the rival bidders the Malaysian conglomerate Tanjong PLC and the Japanese conglomerate Mitsubishi Corp.
In recent weeks, teams of U.S.-based investment funds have snapped up ever-bigger targets, buying Toys R Us Inc. for about $6.6 billion, and SunGard Data Systems Inc. for $11.3 billion. And in Europe, an Egyptian telecom magnate who plans to use funds from private-equity firms is near to an agreement to buy Italy's Telecommunicazioni SpA for more than €5 billion ($6.41 billion).
Buyout funds are often able to outbid companies that have a more strategic rationale for making the purchase because they are willing to borrow heavily to finance the deal. A company making an acquisition can't borrow as much because it would suffer from a lower credit rating, which could drive up its cost of doing business across the board.
As their portfolios of companies grows, many private-equity funds have warmed to the steady and stable cash that flows in from utilities to smooth out erratic earnings from other investments, particularly when some bets on troubled companies require years to turn around.
Indeed, the Ontario Teachers' fund last year took part in a group that bought some of National Grid Transco PLC's U.K. gas-distribution networks for £3.2 billion ($6.09 billion).
National Grid Transco has recently been considering selling its natural gas metering subsidiary to private-equity funds in a deal that could be worth as much as £1.5 billion.
Write to Dennis K. Berman at dennis.berman@wsj.com
and Jason Singer at jason.singer@wsj.com
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