Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

(Updated )

If the pending takeover of Louisiana utility Cleco has taught infrastructure investors anything, it's that they better be in it for the long haul when tackling deals requiring approval from U.S. states.

It's been 487 days since the $3.4 billion take-private deal was announced in October 2014, with a targeted closure date sometime in the second half 2015. That came and went, but the finish line is now finally in sight: The Louisiana Public Service Commission could decide its fate as soon as Wednesday.

Cleco's stock is trading at a fairly narrow discount of roughly 4 percent to the $55.37 a share cash offer from an investor group led by Macquarie Infrastructure and British Columbia Investment Management. That shows investors expect the deal to to receive the green light despite a Louisiana regulatory judge saying earlier this week that such a transaction doesn't serve the public interest.

Judge Valerie Meiners also wrote that any approval should come with conditions. These include ensuring the investor group adheres to 77 commitments that it offered up, and also that Cleco maintains an investment-grade credit rating, meaning its new owners can't fund the deal with as much debt as originally intended. 

Tick Tock
The owner of a regulated utility has been waiting more than 480 days for its takeover to be approved.
Source: Bloomberg

So while it could turn out to be a worthwhile purchase, any gains may be coming at a bigger-than-expected cost. To appease the state, the buyer group has offered customers rate credits and other savings totaling $143 million over 15 years, as well as other promises around job retention and charitable funding.

Another point, namely "tighter restrictions on changes in control or transfers of interest by the investor group requiring prior Louisiana Public Service Commission approval," implies that the eventual sale of Cleco may be as drawn out as its purchase. For the likes of Macquarie, which make investments using money from 10-year closed-end funds, delays on the way in and on the way out can crimp returns.

Macquarie's commitment to seeing the Cleco deal through despite the complications and delays highlights a dilemma faced by infrastructure funds. 

These investors, primarily from Australia and Canada, flocked to the U.S. in recent years in the expectation that individual states would choose to reduce their own debt loads by selling or leasing assets such as airports, toll roads and utilities. But infrastructure transactions failed to materialize in a big way, and some that did got scrapped, including the sale of Philadelphia Gas Works and the deal for the right to operate Chicago Midway International Airport. Funds have had to face the reality that pickings are going to be slimmer than projected. 

That's not helped by the fact that pension funds are winning auctions like the one for the operator of the Chicago Skyway toll road. Because pension funds prefer to own such companies far longer than most traditional infrastructure funds, it means they're unlikely to be up for sale again in the near term. 

That explains, for instance, why Fortis -- which must win multi-state approval for its pending acquisition of Midwestern transmission company ITC -- expects there to be no shortage of interested infrastructure partners lining up to help fund the deal.

A lack of choice, combined with the need to spend funds raised from investors, is why deals that would otherwise be deemed not worth the trouble are instead being explored. Until or unless privatizations become a priority, infrastructure investors in North America will have to take what they can get. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Gillian Tan in New York at

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Beth Williams at