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Southern Star Central Eyeing Possible Sale, MLP, or IPO

Southern Star Central Corp. announced Thursday that it has hired Lehman Brothers to help it explore strategic alternatives for its Southern Star Central Gas Pipeline company, including potentially forming a master limited partnership, selling the company, holding an initial public offering or other options.

Owensboro, KY-based Southern Star is owned by AIG Highstar Capital, LP., a private equity fund sponsored by insurance firm American International Group Inc. AIG bought the 6,049-mile Central pipeline system from Williams in 2002 for $555 million. The pipeline transports gas from Kansas, Oklahoma, Texas, Wyoming and Colorado to markets in the Midwest, including Kansas City, Wichita, Springfield, and St. Louis. It has a design capacity of 2.3 Bcf/d and an annual throughput of about 340 trillion Btus.

"The decision to explore the strategic alternatives available to the Southern Star's shareholders at this time reflects the tremendous successes that we have achieved at Southern Star since AIG Highstar's acquisition of the company in 2002, as well as the recent valuations that have been realized for similar businesses," CEO Michael J. Walsh, told the pipeline company's 458 employees.

Walsh said the company's successes have included its ownership transition and establishment as an independent company, the issuance of public debt, the completion of a new headquarters, investment in its business and assets, the identification and development of new markets and customers and the recent completion of a rate case. "We have accomplished more in the past two-and-a-half years than many companies accomplish in decades," he said.

The Southern Star board and its advisors have started working with management to prepare due diligence materials and supporting data. They expect to complete this work over the next several weeks, after which a decision will be made on a course of action.

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