Macquarie has stepped away from a bid to buy a stake in Kuwait’s oil pipeline network valued at up to $7 billion, according to two people familiar with the matter. The Australian infrastructure firm told Kuwait Petroleum Corporation (KPC) on Friday that it was leaving the process, citing the conflict in the region and the uncertain outlook, one source said.
The exit makes Macquarie one of the first publicly reported investors to withdraw from a Gulf transaction because of the Iran war. The move comes as dealmakers attempt to push ahead with asset sales even as unprecedented regional volatility raises doubts about valuations and execution.
Market participants say the conflict has reduced enthusiasm among potential buyers for Gulf infrastructure. Millions of barrels of crude are currently stranded after Iran effectively shut the Strait of Hormuz, and Kuwait has no alternative export route for its oil other than the narrow passage between Iran and Oman - the waterway through which about one fifth of global oil supply normally moves.
Despite the heightened uncertainty, companies and their advisers are continuing to try to advance the sale, several deal professionals told sources familiar with the process. KPC launched the sale just hours before Iranian missiles first struck Gulf cities late last month, a third source said.
Even after KPC declared force majeure and curtailed production, bankers involved in the transaction have remained active in pursuing the deal, the sources said. Advisers have circulated documents to prospective investors and are seeking non-binding offers by April 7, according to those familiar with the timeline.
Investors previously reported to have expressed interest included BlackRock and KKR, though it was not clear whether those firms remain engaged in the process. The outlook for future volumes of oil moving through the network and the pipeline system's proximity to Iranian military assets are complicating assessments of both strategic and financial risk.
Requests for comment went unanswered from KPC and BlackRock. Macquarie and KKR declined to comment, the sources said.
Other infrastructure transactions in the Gulf are moving forward, albeit with greater caution. Saudi Arabia’s King Abdullah Financial District has been marketing its district cooling assets in a sale expected to fetch more than $500 million, with non-binding offers submitted in the first week of March, two other people with knowledge of the situation said. KAFD was not immediately available for comment.
Saudi infrastructure firm SISCO Holding is also advancing a sale of a water asset valued at about 1 billion riyals ($266 million), two sources said. SISCO was not immediately available for comment.
Deal advisers and investors are confronting a novel set of constraints. One source described it as unrealistic for sellers to maintain tight deadlines given that potential buyers are making decisions in the middle of airstrikes and economic uncertainty. Some investors are closely re-examining material adverse change clauses in contracts - provisions that can allow them to exit deals - and there are concerns that financing could become more difficult to secure if lenders demand higher rates for exposure to local corporates.
“We are seeing a degree of caution, particularly around transactions that were already underway, with some clients taking a little more time to progress to completion,” said Anshul Gupta, KPMG’s partner and head of deal advisory for the Middle East. He added: "We also expect capital to remain available, although pricing is likely to reflect broader market conditions in the near term."
Not all buyers are pausing. Imad Ghandour, co-founder and managing director of private equity firm CedarBridge Capital Partners, said his firm was proceeding with a couple of transactions despite current events. "We strongly believe that GCC macro trends will persist," he said.
For now, Macquarie’s withdrawal highlights the strain the Iran war has placed on investor appetite for Gulf energy infrastructure, while the ongoing marketing efforts by sellers and advisers suggest that deal activity will continue to be tested by the shifting security and commercial landscape.