February 19, 2015 [OPIS] – A Boston-based private equity group has bested Marathon Petroleum and several publicly traded master limited partnerships and will take title to John Arnold’s Petroleum Products Corp. (PPC) terminal assets, OPIS has learned.
The PPC assets have been on the market since mid-2014 and Marathon was thought to have the inside track on the sale. Instead, OPIS hears that ArcLight Capital Partners will buy the properties. ArcLight Capital is a Boston-based private equity firm that has invested over $12 billion in 88 transactions since it was founded in 2001. The company targets midstream, power and production opportunities in energy.
ArcLight is not to be confused with New York-based Arc Logistics LP, a public company that operates crude and products terminals in various Great Lakes and southeast states as well as in the New York Harbor and in Louisiana and Mississippi. The two companies have no affiliation.
While not a household name for marketers, ArcLight Capital is well known in energy investment circles. The company at one point held a stake in the General Partner share of Buckeye, and has helped launch public MLP’s in natural gas, crude oil, shale, and asphalt with an emphasis on logistics.
Parties familiar with the PPC terminal package suggest that the facilities are the most well-managed and well-maintained properties in the country. Privately held PPC has essentially no debt and operated one of the most efficient products systems in the country. That efficiency might have been detrimental to some potential buyers who struggled with a business plan that would find upside or growth for the terminals. Since the transaction will involve two private companies, the purchase price is not likely to be disclosed but most sources peg the price above $1 billion. Investment house Credit Suisse has handled the sale.
PPC properties for sale included approximately a dozen terminals — all in Pennsylvania — with about 4 million barrels of storage in facilities that range in size from 150,000 barrels to over 500,000 barrels. Reports indicated annual EBITDA of approximately $100 million in 2014.
The terminals are located in in Allentown, Altoona, Coraopolis, Dupont, Pittsburgh, Neville Island, Harrisburg, Northumberland, Sinking Springs, Mechanicsburg, Highspire and Lancaster. A terminal owned by PPC in Williamsport is in the process of being closed, OPIS is told, so it is not part of the package. In addition to operating a proprietary terminal in Coraopolis, PPC leases an additional terminal there from Buckeye Pipeline. A lubes company owned by PPC is reportedly not part of the sale.
The two biggest PPC facilities are in Harrisburg and Coraopolis with each boasting in excess of 500,000 barrels of capacity. Sources tell OPIS that PPC has its own unit train operation that brings ethanol directly from Chicago and the Midwest into its western Pennsylvania locations. It can also take barge deliveries from Midwestern refineries to a large facility near Pittsburgh.
It is not known whether Marathon Petroleum backed away from a deal, or was simply outbid by ArcLight Capital. There is speculation that Marathon might be more intrigued by a potential acquisition of Gulf Oil, which has been shopped by investment house EverCore Partners since October. A purchase of Gulf’s terminal network and wholesale and dealer business would help Marathon achieve its strategy of moving more of its refining production through entities it controls.
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