KKR targets $9bn acquisition of US gas and power distributor UGI

KKR has proposed a roughly $9 billion acquisition of UGI, a Pennsylvania-based natural gas and electricity distributor, according to a report by the Wall Street Journal. The private equity firm aims to gain exposure to the growing demand for reliable power from artificial intelligence data centers, as stated in the source. To acquire UGI, KKR has offered to pay $42.50 per share, which represents a significant premium to the company's recent market price.

On Monday, UGI shares closed at $35.09, valuing the company at around $7.5 billion, according to the source.

UGI operates regulated natural gas and electric utilities, as well as a propane distribution business called AmeriGas. The company also manages natural gas pipelines and storage infrastructure, and distributes liquefied petroleum products in Europe, as detailed in the source. KKR is following a trend of private equity investors focusing on energy infrastructure that can benefit from the rapid expansion of AI and data centers, as noted in the source.

The move by KKR comes as UGI's stock has underperformed compared to the broader market. Over the past year, UGI shares have risen by less than 2%, while the S&P 500 has gained approximately 20%, according to the source. Despite the enthusiasm surrounding energy infrastructure, UGI's shares have been pressured by recent declines in natural gas prices. Strong US production and high storage levels have increased supply, leading to a drop in natural gas prices, as mentioned in the source.

The proposed deal remains preliminary, and there is no guarantee that UGI will accept KKR's offer or any other potential buyer, as stated in the source.