US-based integrated energy company Entergy has agreed to divest its gas distribution business to private equity management firm Bernhard Capital Partners in an all-cash deal worth around $484m.

The deal involves the respective gas businesses of Entergy Louisiana and Entergy New Orleans.

Entergy Louisiana’s gas division serves approximately 95,000 homes and businesses in the Baton Rouge area.

On the other hand, Entergy New Orleans’ gas business serves close to 109,000 homes and businesses in New Orleans. The business unit has approximately 58km of natural gas transmission lines and more than 2,735km of natural gas distribution lines.

Net proceeds from the deal will be allocated to bolster Entergy’s credit by retiring debt. Besides, the proceeds are expected to back the capital requirements of the company’s expanding electric utility business with a customer-centric focus.

Entergy chairman and CEO Drew Marsh said: “This agreement allows us to continue our strategy of simplifying operations and focusing on our regulated electric utility business for the benefit of our customers.

“Our gas utilities and dedicated gas employees have been and continue to be an integral part of Entergy, which is why it was imperative to approach this decision with thoughtful and deliberate consideration.”

Headquartered in Baton Rouge, Louisiana, Bernhard Capital Partners is engaged in making investments in companies that offer essential services to government, industrial, infrastructure, utility, and energy sectors, including utility assets.

So far, Bernhard Capital Partners has invested in more than 65 service-oriented companies across 19 platforms, encompassing various utility firms. Its portfolio companies are claimed to have a combined global workforce of over 19,000 employees.

Bernhard Capital Partners founder and partner Jeff Jenkins said: “Our work is focused on strengthening businesses to, in turn, strengthen some of our country’s most critical infrastructure assets.

“Under Entergy’s leadership, the natural gas distribution business has effectively served the two largest metropolitan areas in our state for decades.

“We believe this operation is primed to provide even greater services to Louisiana communities and beyond. We have an experienced leadership team prepared to lead it through strategic, transformational growth.”

Apart from standard closing requirements, the deal would be subject to regulatory approvals from the Louisiana Public Service Commission, the City of Baton Rouge/East Baton Rouge Parish Metropolitan Council, as well as the New Orleans City Council.

The anticipated timeline for completion, which includes the regulatory review and a transition phase, is approximately 21 months.

RBC Capital Markets is acting as the financial advisor for Entergy, with legal counsel provided by Skadden, Arps, Slate, Meagher & Flom.

For Bernhard Capital Partners, Jefferies is providing financial advisory services while Kirkland and Ellis is serving as legal counsel.