May 19, 2024

DealBook: Hong Kong Tycoon to Pay $1 Billion for British Gas Firm

HONG KONG — A consortium of companies owned by Li Ka-shing, the richest person in Asia, agreed on Wednesday to buy MGN Gas Networks of Britain for £645 million ($1 billion), as Mr. Li’s corporate empire continued to broaden its already large global footprint in the energy sector.

Three Hong Kong-listed companies controlled by Mr. Li and his family — Cheung Kong Holdings, Cheung Kong Infrastructure and Power Assets Holdings — each have a 30 percent stake in the bidding consortium, while the charitable Li Ka-shing Foundation will hold the remaining 10 percent stake, according to a joint stock exchange announcement on Wednesday.

Mr. Li, 84, is ranked by Forbes as the world’s ninth-wealthiest person, with a net worth of $25.5 billion.

His companies, Cheung Kong Infrastructure and Power Assets, already have substantial investments in Britain’s natural gas, water and electricity sectors. That includes a combined 88.4 percent stake in Northern Gas Networks, a regulated distributor that supplies natural gas to around 6.7 million people and has almost 23,000 miles of pipeline stretching from the Scottish border to South Yorkshire.

The Li firms appear to be betting the complementary nature of MGN’s British gas business will enable them to engineer a turnaround at its unprofitable operations.

MGN Gas Networks, through its wholly owned Wales West Utilities, distributes natural gas throughout Wales and southwest England. Its network supplies 7.4 million customers, and it has 21,750 miles of pipeline.

The company reported a net pretax loss of £63.4 million in the fiscal year ended March 31, slightly worse than the £62.8 million net loss it booked in the previous fiscal year. It had net liabilities of £250.4 million at the end of March.

The Li firms are buying MGN from a group of shareholders that includes several infrastructure funds managed by Macquarie; the Toronto-based Canada Pension Plan; the trustee of a fund run by the portfolio manager Industry Funds Management; and the real estate and investment house AMP Capital. The deal will be settled in cash.

Completion of the MGN deal is subject to approval by the European Commission. The deal is also contingent on the Li companies being able to retain majority control of the equity and assets of Northern Gas in the event they are required by European regulators to sell part of their combined 88.4 percent stake in that firm.

Shares in Cheung Kong Infrastructure were suspended from trading on Wednesday, while shares in Cheung Kong Holdings closed down 0.9 percent and shares in Power Assets finished 1.6 percent lower after the deal was announced.

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