PEP buys more meters but new sectors to follow

17 December 2018 - 12:00 am UTC

Pacific Equity Partners’ (PEP) Secure Assets Fund’s (SAF) next investment is likely to be outside the smart metering sector after it finalises a bolt-on to its intelliHUB metering business, said PEP Director, Evan Hattersley.

PEP announced on Monday (17 December) its intelliHUB smart metering business had acquired Metrix, another metering business in New Zealand, from telco Mercury NZ for an enterprise value of NZD 270m (USD 183m).

The deal was backed by equity from PEP’s new Secure Assets Fund. The amount was not disclosed, but SAF’s 80% holding and Landis+ Gyr’s (L+G) 20% holding in intelliHUB will remain the same after the Metrix deal is done.

Bank sources said the lenders are the same as the eight that had backed the acquisition of Origin’s Acumen business – SAF’s first purchase – which was then combined with Landis+ Gyr’s intelliHub.

According to Inframation deals, the eight lenders to that deal were ANZ Bank, BNP Paribas, CEFC, Commonwealth Bank, Investec, MUFG Bank, NAB and SMBC, which had provided AUD 270m in debt, including AUD 180m for capital expenditure. Excluding the capex facility, the debt-to-equity split in the Acumen deal was said to be around 50:50.

Sources familiar to the situation said, there is more debt than equity in the Metrix deal and it includes a contribution for further capex to rollout smart meters.

The Metrix transaction is expected to reach financial close by 1 March 2019.

Metrix will add 460,000 smart meters to intelliHUB’s approximately 1.5m meters. As for the Acumen deal with Origin, Metrix comes with a long-term contract to provide metering services to Mercury.

PEP’s advisers on the Metrix deal were: NZ investment bank Forsyth Barr, law firm Russel McVeigh, EY on financial and tax due diligence and Herbert Smith Freehills advised the lenders.

Flagstaff Partners was financial adviser and Chapman Tripp legal adviser to Mercury on the deal.

Next deal outside metering

PEP director, Evan Hattersley, said intelliHUB is seeking further smart meter acquisitions from Australian and NZ telcos, but SAF’s next deal likely will not be in that sector.

“We are actively engaged in a number of live opportunities and will have further deals to announce in 2019. I expect our next deal will be outside of smart meters,” he told Inframation.

“We are also looking at another opportunity in the energy space [outside smart meters], as well as a number of opportunities across the traditional infrastructure asset classes,” he said, adding that these include transport, power and energy, logistics, water, health, education and communications.

Hattersley said the SAF fund is expected to reach its AUD 750m to AUD 1bn target in the first quarter of 2019 after reaching a first close of AUD 600m in early December.

Sources familiar said other sales processes SAF has considered include Brookfield’s Flow Systems business, Jemena’s Aquanet and Morrison & Co’s ANU student accommodation. However, the last two did not have enough growth prospects for SAF.

 

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