Hong Kong fund leads chase for CPPIB-backed metering firm Ista: Reuters

Hong Kong’s CK Infrastructure is seen as the front-runner to buy German metering and energy management group Ista for more than 4.5 billion euros (US$5.2 billion), sources close to the matter told Reuters.

CKI, part of ports-to-telecoms conglomerate CK Hutchison Holdings, made a binding offer for private equity-owned Ista on Tuesday, the sources said, adding that two consortiums considered strong contenders refrained from making final bids. It remains unclear whether other final bids were submitted, they added.

Canada Pension Plan Investment Board, which already owns a minority stake in Ista and had tied up with Blackstone Group to buy the whole company, was one of the contenders to hold back, as was a consortium of Ontario Teachers’ Pension Plan and Brookfield Asset Management.

Owner CVC Capital Partners is expected to choose a buyer this week, two of the sources said.

European buyout group CVC, which bought Ista in 2013 at a valuation of 3.1 billion euros, had hoped to fetch up to 5 billion euros for Ista, equating to 12 times expected 2017 core profit (EBITDA) of 420 million euros, people familiar with the matter said last month.

CVC declined to comment on Tuesday and a CKI representative was not immediately available for comment. The other investors declined to comment or were not immediately available.

Ista, which provides energy and water metering, posted EBITDA of 370 million euros in 2016 on sales of 850 million euros.

CKI has a market capitalization of HK$190 billion (US$24 billion) and is invested in electricity generation and distribution, gas distribution, oil pipelines, water supply and wind power.

Its European investments include a slew of British assets such as UK Power Networks, one of the largest electricity suppliers to London, as well as water, sewage and even rolling stock group UK Rail. It also owns the Netherlands’ largest energy-from-waste company AVR and has interests in Portugal Renewable Energy. But so far it lists no German investments on its home page.

The deal is being closely watched by investors ahead the planned sale of Ista peer Techem by Australian infrastructure investor Macquarie Group in the autumn, sources have said.

European bankers are working on debt financing in excess of seven times Ista’s EBITDA and some bankers are working on leverage levels as high as 8.5 times, banking sources said.

CVC’s adviser, Goldman Sachs, is offering staple financing of about 5.8 times, significantly lower than European banks, to comply with U.S. guidelines on leveraged lending.

Hoping to attract sponsors, the staple is a hybrid facility that would allow dividend payments, the sources said.

Update: CPPIB invested in Ista alongside CVC and the company’s management team in 2013.

By Arno Schuetze and Claire Ruckin

(Additional reporting by Alexander Hübner and Dasha Afanasieva; Editing by Maria Sheahan and David Goodman)

(This story has been edited by Kirk Falconer, editor of PE Hub Canada)

Photo courtesy of Ista