Sovereign-Wealth Funds Buy Stake in U.K. Gas Business

LONDON—A consortium including sovereign-wealth funds from China and Qatar has agreed to pay £ 3.6 billion ($4.55 billion) for a 61% stake in the U.K.'s largest gas distributor from National Grid PLC, the culmination of a year-long sale process.

The deal represents the latest large foreign investment in U.K. energy infrastructure and comes as investors seek stable returns at a time of low bond yields. But it could also raise concerns by the government of U.K. Prime Minister Theresa May.

In addition to the £ 3.6 billion cash payment, the British company will get £ 1.8 billion from additional debt financing. Overall, the deal values the unit at £ 13.8 billion, including debt.

National Grid will retain a 39% stake in the unit and the sale will allow the company to return £ 4 billion to shareholders and rebalance its portfolio, which also includes U.K. electricity networks.

The consortium includes China's CIC Capital Corporation and the Qatar Investment Authority, as well as investors such as Macquarie Infrastructure and Real Assets, Allianz Capital Partners and Hermè s Investment Management. Dalmore Capital and Amber Infrastructure Ltd./International Public Partnerships Ltd. are also members of the consortium.

The business is the largest distributor of gas in the U.K., delivering gas to nearly 11 million customers in areas such as London, Birmingham and Manchester.

National Grid said it expects the deal to complete, once it is cleared by European Union competition authorities, by the end of March next year.

Shares in the company, which said it was exploring a sale of the unit in November last year, rose 0.8% in early trading in London.

Corrections & Amplifications: National Grid's U.K. gas-distribution business is valued at roughly $17 billion. A headline on an earlier version of this article incorrectly stated funds were paying $17 billion for a stake in the business. (Dec. 8, 2016)

Write to Ian Walker at [e-mail]

(END) Dow Jones Newswires

December 08, 2016 08:35 ET (13:35 GMT)

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