TPG backs natural gas company with $500m

Houston-based Valerus Compression will use the proceeds in part to refinance debt. The deal is predicated on growth in international natural gas production.

TPG Capital will invest $500 million in the debt and equity of privately held Valerus Compression Services, a Houston-based provider of “handling services” for natural gas.

Valerus assists in the compression, processing and treatment of natural gas. Proceeds from the TPG investment will be used to fund the company’s growth plans but also to “refinance the company’s existing debt”, according to a statement.

Further details of the deal, led by TPG partner Michael MacDougall, were not disclosed.

Valerus’ current chief executive, Chet Erwin, will continue in his role. Dan Smith, the former chairman, president and CEO of Lyondell Chemical, will become the chairman of Valerus. Smith is currently the chairman of Kraton Polymers, which was acquired by TPG from Ripplewood Holdings in 2003.

MacDougall said the investment in Valerus was in part a bet on the increased production of natural gas internationally.

JPMorgan and Tudor, Pickering, Holt & Co advised TPG on the deal.