NEW YORK (Reuters) - General Electric Co.’s (GE.N) energy unit will pay $603 million for a controlling stake in Regency Energy Partners LP RGNC.O, an owner of natural gas pipelines and processing equipment.
The transaction gives GE Energy Financial Services a 91 percent stake in Regency’s general partner, meaning GE will have operational control of the company.
Under the deal with Dallas-based HM Capital Partners LLC, GE Energy Financial Services has acquired an estimated 37 percent of Regency’s limited-partner units outstanding.
“For Regency and its investors, we offer our strong balance sheet and the potential to add midstream assets we currently own or will acquire,” Dan Castagnola, managing director at GE Energy Financial Services in Houston, said in a statement.
Regency owns about 4,000 miles of gas gathering pipelines, a 320-mile intrastate pipeline in North Louisiana and 13 processing and treating plants with a combined throughput of 1.2 billion cubic feet per day.
The company spent $350 million in internal growth projects over the previous two years and about $400 million on acquisitions.
James W. Hunt, chairman, president and chief executive of Regency, told Reuters the company has targeted purchases of under $100 million, which tend not to attract the buyers who have driven up prices for larger assets.
“Prices are very frothy for me,” Hunt said.
The company also has about $75 million in projects underway for the second half of this year, although Hunt said those plans could change when the company’s new board of directors meets for the first time next week.
Hunt said he expected Regency’s networks and assets could also be linked with GE Energy Financial Services’s oil and gas fields in Oklahoma and at other sites.
“We know that GE has invested a lot of money with oil and gas producers to help develop their reserves ... I think that’s a natural networking we’d want to do,” he said.
Hunt declined to comment on whether the new board was likely to raise the distribution above the $1.52 annualized rate from the first quarter’s distribution of 38 cents per unit.
Private equity firm HM Capital Partners helped take Regency public last year and affiliates of HM Capital have retained stakes in Regency, according to the report.
Additional reporting by Nick Zieminski