Morgan Stanley Infrastructure - the infrastructure investment
division of Morgan Stanley Investment Management (MSIM), a wing of
) - declared that it has increased its ownership stake in Southern
Star Central Corp. - the parent company of Southern Star Central
Gas Pipeline (Southern Star) - to 100%.
Southern Star received an undisclosed amount of Morgan Stanley's
preferred stock for this transaction. The other financial details
of the transaction were not divulged by any of the parties
Morgan Stanley Infrastructure is a $4 billion global infrastructure
fund. Earlier in March 2010, it attained a 40% economic stake as
well as 50% governance rights in Southern Star.
Management at Morgan Stanley Infrastructure believes that since
investment prospects in the natural gas pipeline sector in the U.S.
are limited, they are thrilled to obtain full ownership in a
regulated core infrastructure asset.
Further, in collaboration with management at Southern Star, they
had devised a tactical agenda for realization of capital
expenditure and further expansion. Also, with the aforementioned
deal they are aiming to expand their business, besides offering
first-rate service to consumers.
In the last two years, Southern Star has completed many expansion
programs and has many in the pipeline. Further, among other
initiatives it has also spent a significant amount of capital for
greater maintenance, enhancement of public safety and for
evaluating and reducing pipeline risks.
Southern Star is the chief transmitter of gas and a natural gas
storage facility provider to several key U.S. Midwest cities. It
serves metropolitan areas in Missouri, Kansas and Oklahoma and gets
gas supplies from major producing regions, including the Hugoton,
Anadarko and Rocky Mountain basins. The system has 23
interconnections with other key interstate and intrastate
pipelines, allowing consumers to source from additional producing
basins, including the San Juan and Permian basins.
Southern Star believes that the partnership with Morgan Stanley
infrastructure has been instrumental in developing potential and in
incorporating developments in its system. With the closure of the
deal, consumers could expect better and more flexible services.
We expect this deal to help Morgan Stanley to augment its revenue
to some extent.
Morgan Stanley currently retains a Zacks #3 Rank, which translates
into a short-term Buy rating. Considering the fundamentals, we
maintain our long-term Neutral recommendation on the stock. In the
U.S. market, Morgan Stanley's peers are
International Assets Holding Corporation
Goldman Sachs Group Inc.
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