November 7, 2013 [OPIS] - NGL Energy Partners LP said on Wednesday 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 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.
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% interest in Glass Mountain Pipeline, 4.14 owned and 3.85 leased million barrels 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 7.5 times 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% of EBITDA annually for the next several years.
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.
In July, Marubeni Corporation purchased all of the assets and businesses of Gavilon Holdings LLC, except its energy business, for approximately $2.7 billion.
