Buyout firm KKR has teamed up with the Korean national pension system to acquire a significant minority stake in a Chevron (CVX) pipeline company in a deal valued at close to $1 billion.
The sale of the 23.4% stake in Colonial Pipeline, which runs from the Gulf Coast to the Eastern seaboard of the U.S., follows a hotly contested auction with bidders including sovereign wealth funds. It comes at a time when large investors including sovereign funds, private-equity funds and large pension funds are embracing investments in infrastructure, especially in the energy sector.
The little known National Pension Service of Korea is one of the largest and fastest growing pension funds in the world with about $280 billion under management.
The deal with KKR is structured as an account that the private-equity firm manages on behalf of the Koreans, rather than as part of a fund in which the NPS passively invests. That unusual structure is likely to become more common as big national pools of money try to reduce the fees they pay the buyout firms and increase their influence over the deals in which the buyout firms invest.Like many other Asian nations, Korea has seen its currency appreciate against the U.S. dollar, leading country officials to consider stepping up the pace of its investments abroad in an effort to slow the rise of its currency. NPS has large stakes in the leading public companies in Korea and under its current chairman, Jun Kwang-woo, it has been a thoughtful and sophisticated investor outside the country as well. Recently, the NPS has focused on buying high-quality commercial properties in the U.S. and Europe, including the HSBC headquarters in London's Canary Wharf, often at bargain prices. Jun, formerly a regulator, recently published a book on why Korea, one of the first victims of the Asian financial crisis, proved so resilient in the recent global financial crisis. Under its head of Asia, Joe Bae, KKR has been particularly active in Korea, most recently buying Oriental Brewery in a $1.8 billion deal, the largest ever in Korea. Many other sovereign funds, such as Singapore's Government Investment Corp. and the China Investment Corp. have been considering how to increase their infrastructure investments, sometimes with the private-equity firms and sometimes independent of them, since private-equity firms generally make expensive partners.