In a noteworthy cross-border deal showcasing its Latin America, corporate and finance practices, Milbank, Tweed, Hadley & McCloy LLP has represented Swiss private equity firm Partners Group in making a majority investment in Mexico’s leading gas infrastructure firm, valued at approximately $750 million.
Partners Group is acquiring a majority stake in Fermaca, which owns and operates gas pipelines and related energy assets in Mexico. Fermaca pipelines have capacity to ship one-fifth of Mexico’s natural gas needs, including supplies originating in the US. Spurred by Mexico’s recent initiatives easing restrictions on foreign investment in its natural resources, Partners Group said it expects Fermaca to expand its gas transmission activities.
Based in Zug, Switzerland, with offices around the world, Partners Group bought out a previous investment in Fermaca by New York asset manager Ospraie Management. Fermaca’s senior management team is investing alongside its new partner. The buyout is being funded through a combination of equity and debt.
Among Fermaca’s key assets is the Tarahumara Pipeline, a 237-mile transmission pipeline in the Mexican state of Chihuahua, with an interconnection point at the US/Mexico border. Tarahumara has a 25-year contract with Mexico’s state power company, CFE, to transport natural gas. Another piece of Fermaca’s portfolio is Tejas Gas de Toluca (TGT), a gas transportation company which also owns the Palmillas-Toluca pipeline in the Mexican state of Toluca. The TGT pipeline has a 10-year operating track record in one of the country’s prime industrial regions.
“We are thrilled to be representing Partners Group in its first major infrastructure investment in Latin America – it could not have come at a more opportune time, or with a more strategic asset than Fermaca,” said Milbank Project Finance partner Carolina Walther-Meade, who co-led the deal team along with Corporate partner John Franchini; both are also members of the firm’s Latin America and Power and Energy practice groups.
“The government of Mexico has made a serious commitment to partnering with international players in growing its energy sector, and this transaction is a perfect reflection of that promise, especially with the active role played by Fermaca’s senior management team in leading the buyout alongside our client,” Ms. Walther-Meade added. “Fermaca is extremely well positioned in serving Mexico’s energy needs, and its new backing by Partners Group assures its prominence in a continued build-out of the country’s large-scale energy infrastructure.”
Mr. Franchini added, “So many of Milbank’s practice strengths are displayed in this transaction, combining our power and energy M&A expertise with our deep project finance and Latin America bench. Partners Group has an outstanding private infrastructure team in place and we’re looking forward to exploring future energy-related transactions with them in the Americas and elsewhere.”
Other Milbank attorneys working with Partners Group included: Benjamin Miles (securities), Rachel Fink and Kevin Begley (corporate), Tim Fitzpatrick (project finance), Kaitlin Fern and Elina Sheykh-Zade (leveraged finance).
