Global infrastructure investor I-Squared Capital-backed city gas distribution companies in India — AG&P Pratham and Think Gas Distribution — are set to merge, according to two industry executives aware of the development. The combined entity will be valued at over $1.1 billion, acquiring the heft that will help it compete with rivals. It will be a stock-for-stock merger — a share of one company for each of the others.
Currently, I-Squared holds 100% stake in Think Gas Distribution and 73% in AG&P Pratham, the India arm of Singapore-based Atlantic Gulf & Pacific (AG&P) City Gas. About 21% is held by AG&P and 6% by Japan’s Osaka Gas-led consortium. Since both companies are in CGD business, promoters have decided to consolidate operations.
This is aimed at optimising resources and improving utilisation of manpower.
CGD refers to the transportation or distribution of natural gas to consumers in domestic, commercial, industrial and transport sectors through a network of pipelines.
The size of the combined entity will help it take on competitors like Mahanagar Gas, Gujarat Gas, Indraprastha Gas, Gail Gas, Adani Total Gas and Torrent Gas among others.
Osaka Gas and Sumitomo Corp will invest $200-250 million of primary capital in the company as growth capital, said one of the persons cited above.
After the merger, I-Squared Capital will hold over 60% stake in the combined entity. AG&P will hold up to 15% and the Osaka Gas and Sumitomo-led consortium will hold 25%.
In January, the companies had applied to the European Commission in Brussels for merger approval. That was granted in February, said the people cited above.
India, the fourth biggest buyer of liquefied natural gas, wants to increase the share of natural gas in the energy mix to 15% by 2030 from 6% now and the CGD network will play a key role in reaching this target. The use of natural gas will also help reduce the carbon footprint and address climate change challenges. The infrastructure to support this growth is also being put in place. By 2030, the country will have 17,500 compressed natural gas stations and 120 million piped natural gas connections, union minister for petroleum and natural gas Hardeep Singh Puri said on March 6.
Under the 12th and latest CGD bidding round, state-run Oil India, Bharat Petroleum and Hindustan Petroleum among others won licences to building gas infrastructure in the Northeast and Jammu & Kashmir. The round covered 103 districts. The government has decided to spend Rs 41,000 crore to build infrastructure in six northeast states and the two union territories of Jammu & Kashmir and Ladakh.
AG&P, Think Gas, I-Squared Capital, Osaka Gas and Sumitomo didn’t respond to queries.
Osaka Gas is Japan’s second-largest gas supplier and the first Japanese company to invest in the city gas sector in India through AG&P City Gas. Sumitomo is a global trading and investment company. AG&P Group has a presence in engineering, procurement, and construction, city gas distribution businesses, and LNG terminals.
In 2021, Osaka Gas, through affiliate Osaka Gas Singapore and Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN), invested up to $120 million in Singapore-based AG&P City Gas.
“With the formation of a new entity, there will be a pan-India presence. The management will become one and the AG&P’s managing director will be the managing director of the combined entity,” said one of the persons cited, adding that the companies have agreed to the deal in principle and are awaiting regulatory approvals.
In May 2023, ET had reported that Sumitomo, Mubadala Investments and Tokyo Gas were in the race to acquire a 30% stake in Think Gas. The report had also included talk about a merger proposal.
Think Gas holds seven licences to operate in 13 districts in India across the states of Punjab, Madhya Pradesh, Bihar, Uttar Pradesh and Himachal Pradesh and supplies natural gas to the domestic, commercial, industrial and automotive sectors. The company was established in 2018.
AG&P, or Atlantic Gulf and Pacific Co., is headquartered in Singapore and develops LNG import and regasification facilities as well as CGD networks. In India, its city gas distribution arm AG&P Pratham holds 12 licences to exclusively develop CGD infrastructure in 37 districts covering 8% of India’s land mass and spread across five states — Tamil Nadu, Kerala, Andhra Pradesh, Karnataka and Rajasthan.
Source: Economic Times