NGL Energy Partners LP (NYSE:NGL) announced today that it has reached a
definitive agreement to acquire all of the equity interests of Gavilon,
LLC, the diversified midstream energy business owned by funds managed by
Ospraie Management, General Atlantic and Soros Fund Management. The
definitive agreement contemplates the purchase of Gavilon’s energy
business on a cash-free, debt-free basis for a cash purchase price of
$890 million, which includes approximately $200 million of working
capital, subject to a customary adjustment based on a target level of
working capital to be delivered by Gavilon at the closing of the
proposed transaction.
The consummation of the transaction is subject to customary closing
conditions, including the expiration or termination of the waiting
period under the Hart-Scott-Rodino Act. The acquisition, which is
anticipated to close in December 2013, is expected to be immediately
accretive to NGL’s distributable cash flow per unit.
Transaction Highlights
Gavilon principally operates integrated crude oil storage, terminal and
pipeline assets located in Oklahoma, Texas and Louisiana, along with a
complementary crude oil and refined products supply, marketing and
logistics business (SM&L). Gavilon’s crude oil assets include a 50
percent interest in Glass Mountain Pipeline, 4.14 owned and 3.85 leased
million barrels (MMbbls) of storage in Cushing, Okla., a marine terminal
and nine truck terminals including more than 22 lease automatic custody
transfer (LACT) units. Through its SM&L business, Gavilon also leases a
network of over 200 trucks, 350 railcars and 8 barges to transport crude
oil for customers. In addition, Gavilon markets and supplies refined
products and natural gas liquids through a network of more than 300
distribution terminals across 39 states.
NGL anticipates that the cash purchase price, which represents
approximately 7.5x Gavilon 2014 estimated run-rate earnings before
interest, taxes, depreciation and amortization (EBITDA), will be
financed with approximately $240 million of equity under a private
placement of common units, and approximately $650 million of borrowings
under its credit facility. The transaction is expected to provide NGL
with an attractive portfolio of organic growth opportunities, with
approximately $65 million of organic growth capital expenditures
associated with the build-out of terminal assets budgeted for remainder
of 2013 and 2014. In addition, as a significant portion of the assets to
be acquired are newly constructed, maintenance capital expenditures are
expected to be less than 5 percent of EBITDA annually for the next
several years.
In connection with the proposed acquisition, UBS Investment Bank is
serving as NGL’s exclusive financial advisor and Locke Lord LLP is
serving as NGL’s legal counsel. Barclays is serving as Gavilon’s and the
Sellers’ exclusive financial advisor. Jones Day and McGrath North
provided legal representation for Gavilon.
A conference call to discuss the Gavilon transaction is scheduled for
10:00am CST on November 6, 2013. Analysts, investors, and other
interested parties may access the conference call by dialing (866)
510-0707 and providing access code 81881674. An archived audio replay of
the conference call will be available for 7 days beginning at 2:00pm CST
on November 6, 2013, and can be accessed by dialing (888) 286-8010 and
providing access code 54962989. Prior to the conference call a
presentation will be available on the Partnership’s website at www.nglenergypartners.com.
About NGL Energy Partners LP
NGL Energy Partners LP is a Delaware limited partnership. NGL owns and
operates a vertically integrated energy business with four primary
businesses: water services, crude oil logistics, NGL logistics and
retain propane. NGL completed its initial public offering in May 2011.
For further information, visit the Partnership’s website at www.nglenergypartners.com.
Non-GAAP Financial Information
NGL defines EBITDA as net income (loss) attributable to parent equity,
plus income taxes, interest expense and depreciation and amortization
expense. NGL defines Adjusted EBITDA as EBITDA excluding the unrealized
gain or loss on derivative contracts and the gain or loss on the
disposal of assets and share-based compensation expenses. Adjusted
EBITDA should not be considered an alternative to net income, income
before income taxes, cash flows from operating activities, or any other
measure of financial performance calculated in accordance with GAAP as
those items are used to measure operating performance, liquidity or the
ability to service debt obligations. NGL believes that Adjusted EBITDA
provides additional information for evaluating its financial performance
without regard to its financing methods, capital structure and
historical cost basis. Further, EBITDA and Adjusted EBITDA, as NGL
defines them, may not be comparable to EBITDA and Adjusted EBITDA or
similarly titled measures used by other entities.
Forward-Looking Statements
This press release includes “forward-looking statements.” All statements
other than statements of historical facts included or incorporated
herein may constitute forward-looking statements. Actual results could
vary significantly from those expressed or implied in such statements
and are subject to a number of risks and uncertainties. While NGL
believes its expectations as reflected in the forward-looking statements
are reasonable, NGL can give no assurance that such expectations will
prove to be correct. The forward-looking statements involve risks and
uncertainties that affect operations, financial performance, and other
factors as discussed in filings with the Securities and Exchange
Commission. Other factors that could impact any forward-looking
statements are those risks described in NGL’s annual report on Form
10-K, quarterly reports on Form 10-Q, and other filings with the
Securities and Exchange Commission. You are urged to carefully review
and consider the cautionary statements and other disclosures made in
those filings, specifically those under the heading “Risk Factors.” NGL
undertakes no obligation to publicly update or revise any
forward-looking statements except as required by law.
Copyright Business Wire 2013