European News

17, May 2012.

A group led by Macquarie Group Ltd. (MQG) agreed to pay 3.2 billion euros ($4 billion) to EON AG for a network of natural-gas pipelines in Germany.

The investors hired nine banks to underwrite more than 2 billion euros of loans to back their acquisition, according to two people with knowledge of the situation.

Macquarie, Australia’s largest investment bank, last month forecast an earnings recovery after a slump in trading income and dealmaking fees dragged full-year profit to an eight-year low. Sydney-based Macquarie made its name buying infrastructure assets, bundling them into funds, then selling them at a profit before the credit crunch slashed asset values and raised the cost of debt used to finance such purchases.

“Macquarie has been repositioning its business away from the specialist infrastructure space and expanding into more traditional areas of investment banking,” said Sean Fenton, who manages about A$900 million at Tribeca Investment in Sydney. “But this proves they will still be active in that space, especially due to the demand for yield and as governments and companies that need to raise money create opportunities in the infrastructure sector.”

The price for Open Grid Europe, Germany’s biggest gas- transmission system, includes adjustments for pensions and other assets, Dusseldorf-based EON said in a statement yesterday. The buyers include a fund of German reinsurer Munich Re, the Abu Dhabi Investment Authority’s Infinity Investments and British Columbia Investment Management Corp., EON said.

Loan Facility

Bank of Nova Scotia, BNP Paribas SA, Export Development Canada, Commerzbank AG, Credit Agricole SA, ING Groep NV, Royal Bank of Canada, Societe Generale SA, and UniCredit SpA underwrote the financing that will amount to about 2.5 billion euros when undrawn working capital and investment facilities are included, said the people, who declined to be identified because the deal is private.

The debt, which will have three and five-year tranches, has been structured to support an investment-grade rating and may be refinanced by bonds later, said the people. Karen Smith, a Macquarie spokeswoman in London, declined to comment.

EON, Germany’s largest utility, plans to sell 15 billion euros of assets after Japan’s Fukushima nuclear disaster prompted German Chancellor Angela Merkel to start phasing out atomic generation. The first phase of reactor shutdowns cut EON’s profit by 2.5 billion euros in 2011. EON yesterday said it has sold 12 billion euros of assets.

“It’s a good deal for a good price,” Peter Wirtz, an analyst at WestLB AG, said by telephone from Dusseldorf. “EON’s disposal program has worked out better than expected.”

Open Grid Europe operates about 12,000 kilometers (7,460 miles) of gas transmission pipes in Germany, according to its website. A group including GDF Suez SA, the IFM Australian Infrastructure Fund and CNP Assurances SA was also interested in Open Grid Europe. Funds managed by Macquarie Infrastructure and Real Assets bought RWE AG (RWE)’s German gas grid unit in 2011.

EON said it expects the deal, which requires approval from German authorities, to be concluded in the third quarter.