Actis builds oil and gas portfolio with $102m investment

The emerging markets-focused private equity firm is forming an oil and gas industry joint venture with Singapore's KS Energy.

Actis is investing S$142 million ($102 million; €69 million) for a 44.4 percent stake in KS Distribution, an umbrella company to be formed following the integration of KS Energy’s oil and gas and marine distribution services businesses with those of Aqua-Terra Supply (ATS) and SSH Corporation.

The investment has been made from Actis Emerging Markets 3, a pan-emerging markets private equity fund, which closed on $2.9 billion in December 2008, surpassing its $2.5 billion target.

KS Energy is an integrated oilfield supply and services provider to the global oil and gas, marine and petrochemical industries. Its primary activities include the distribution of parts and components, capital equipment charter and provision of drilling and rig management services. The proposed investment concerns only the distribution business and not exploration or production.

Singapore-listed KS Energy currently owns a 54.81 percent stake in ATS, which in turn owns a stake of 28.1 percent in SSH. As part of the deal, KS Energy has proposed to acquire all the shares it does not already own in these two companies and bring them under the umbrella of KS Distribution, a newly incorporated entity, Actis said in a statement.

The acquisition will be funded by the cash injection by Actis and through an issue of new shares by KS Energy. KS Energy will retain a 55 percent stake in KS Distribution. The remaining 0.6 percent stake will be owned by the future CEO of KS Distribution.

KS Energy has offered S$0.3738 per ATS share, a 29 percent premium over Monday’s close, and S$0.275 per SSH share, a 15 percent premium to Monday’s close. The proposal is subject to approval from the shareholders of the three companies.

Actis said the deal will streamline and strengthen the distribution businesses, increase their efficiency and broaden their geographic reach. Following its completion, KS Distribution will have operations in eight countries and it will distribute more than 60,000 line items and represent more than 300 global brands.

Over the last three years, Actis has committed more than $200 million in exploration, production, equipment and services in the wider oil and gas industry in China, Pakistan, Nigeria, Tunisia and Southeast Asia.

In 2007, the private equity firm was part of a consortium that invested $380 million in Singapore-based Asia Pacific Exploration Consolidated, an oil and gas exploration company. Other investors in the consortium included Singaporean sovereign wealth fund Temasek Holdings, global power company AES and New York-based private equity firm Pine Brook Road Partners.

Actis manages $4.8 billion globally including $2.4 billion in Asia. In October, Actis held a final close on $750 million for Actis Infrastructure 2, falling short of its $1.25 billion target.