Private Equity Fund

Private Equity Fund

April 01, 2007

Private equity fund takeovers of energy companies are requiring more careful attention to antitrust issues.

The Federal Trade Commission filed a complaint in late January challenging a proposed $22 billion purchase of an interest in pipeline company Kinder Morgan by the Carlyle Group and Riverstone Holdings. The FTC charged the purchase would have led to too much market concentration in the operation of gasoline terminals in 11 cities in the southeastern United States. The two private equity groups already had significant holdings in a competitor of Kinder Morgan called Magellan Midstream.

The parties worked out a consent order to address the competitive issues. Among other steps, they agreed to internal controls to prevent the exchange of sensitive information between the two companies and agreed to drop off the Magellan board.

The two private equity funds were luckier than the parties in two other energy M&A deals this year. In March, the FTC voted to block the purchase of Peoples Natural Gas Co. by Equitable Resources. The two companies are rival natural gas suppliers in Pittsburgh. The agency could also vote in April to block a $1.13 billion purchase of Giant Industries by Western Refining Inc. The companies are oil refiners.

Private equity funds accounted for 26% of all merger and acquisition activity in 2006.

Keith Martin