Canadian power company Emera Inc. announced Monday it agreed to sell its wholly owned operating company New Mexico Gas Co. Inc. (NMGC) to private equity firm Bernhard Capital Partners for $1.252 billion, including about $500 million in assumed debt.
NMGC is the largest natural gas utility in New Mexico, serving more than 545,000 customers and managing over 12,000 miles of transmission and distribution pipelines. Emera bought NMGC as part of its acquisition of the TECO group of companies in 2016.
The purchase price represents around 23 times NMGC’s last 12 months earnings and the transaction value 1.42 times its rate base.
Estimated after-tax net proceeds of $750 million will be used to repay Emera’s holding company debt and support its investment opportunities in its regulated utility businesses. The transaction is expected to improve the company’s debt metrics and reduce its proportion of holding company leverage.
“This transaction strengthens Emera’s balance sheet, supports our ambitious capital plan and reinforces our strategic decision to optimize our portfolio and reallocate capital to our highest growth markets to drive long-term value for our shareholders,” Emera CEO and president Scott Balfour said in a statement. “We’re proud of the work we have done together over the past eight years to drive customer growth and enable more than $800 million in strategic capital investments.”
The transaction has to clear regulators in New Mexico and is expected to be completed in late 2025, but won’t close before Sept. 30.
J.P. Morgan Securities was financial advisor to Emera with Davis Polk & Wardwell as legal advisor. Jefferies was Bernhard’s financial advisor with Kirkland & Ellis as legal advisor.
The Kirkland team was led by corporate partners Bill Benitez, Rob Goodin, Patrick Moneypenny and Daniel Cadis and associates Shelby Morgan and Dan O’Connor.
The group also included debt finance partners Lucas Spivey, Jordan Roberts and Purun Cheong, tax partner Mark Dundon and energy regulatory partner Brooksany Barrowes.
Benitez has worked on a slew of deals by Baton Rouge, La.-based Bernhard. This year alone he advised on its investment in Brailsford & Dunlavey last month and Strategic Management Solutions in April and its acquisition of CenterPoint Energy Inc.’s local distribution company businesses in February for $1.2 billion. And this past October, Benitez counseled Bernhard on its purchase of Entergy’s gas distribution business for $484 million in cash.
Jeff Jenkins, founder and partner at Bernhard, said the investment directly aligns with its strategy to invest in infrastructure assets and utilities “that are critical to building more resilient communities.”
Jenkins added the leadership team and all employees will remain in place after closing and the firm anticipated creating about 70 new local jobs. He noted another portfolio company, Albuquerque-based Strategic Management Solutions, has operated in New Mexico for 25 years and generated economic growth and job opportunities across the state.
Bernhard said it recently announced agreements to acquire multiple leading natural gas LDCs that serve communities in the Gulf South. To date, the firm has invested in nearly 70 companies across 20 platforms, including several utility companies, that employ 20,000 people globally.
The private equity firm has deployed capital in four funds across several strategies and has more than $4 billion of gross assets under management.