- Transformational merger creates
strategic midstream platform
- Enhance access to capital sources;
target pro forma liquidity over $250 million
- Low pro forma leverage of 3.8x and
improved ability to pursue acquisitions
- Establish clear path to mid-single
digit distribution growth through the long-term
American Midstream Partners, LP (NYSE: AMID) (“American
Midstream”) and JP Energy Partners LP (NYSE: JPEP) (“JP Energy”)
announced today their execution of a merger agreement to create a
combined midstream platform. American Midstream will acquire 100%
of JP Energy in a unit-for-unit merger which is anticipated to have
minimal, if any, tax recognition for the unitholders. In
conjunction with the transaction, ArcLight Capital Partners, LLC
(“ArcLight”), the sponsor of both American Midstream and JP Energy,
will combine the general partners of the two companies. Upon
closing, the combined entity is expected to generate pro-forma
Adjusted EBITDA of approximately $185 million, assuming 2016
mid-point guidance from each respective company and including
run-rate synergies of approximately $10 million.
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The merger of American Midstream and JP Energy will create a
diversified midstream business operating in leading North American
basins, including the Permian, Gulf of Mexico, Eagle Ford and
Bakken. The combined partnership will have an estimated enterprise
value of $2 billion and its unitholders are expected to benefit
from significantly improved scale and financial flexibility to
invest in growth projects, third-party acquisitions and potential
drop downs from ArcLight, while establishing a path to mid-single
digit distribution growth over the long-term.
“The merger elevates and reshapes our two businesses into a new
platform that we expect will allow for higher growth, new business
opportunities and a stronger financial position than either company
could achieve separately,” said Lynn L. Bourdon, III, Chairman,
President and Chief Executive Officer of American Midstream. “This
transformational combination is the next logical step in expanding
services from the wellhead to the end user market. We will begin to
experience the impact of our value chain growth strategy by
offering customers a more competitive suite of services that
enables us to capture incremental fee opportunities that maximize
returns to unitholders. We look forward to creating further
alignment with ArcLight as we execute on our long-term growth
strategy.”
“We believe the merger between American Midstream and JP Energy
makes a tremendous amount of sense, offering all stakeholders a
solidified financial profile on a stronger, more diversified
platform with multiple avenues for growth,” added Dan Revers,
Managing Partner of ArcLight. “Through the combination, ArcLight
can concentrate its financial and strategic support and work even
more closely with Lynn and his team to continue the growth of
American Midstream.”
“This merger provides the opportunity for JP Energy unitholders,
customers and employees to participate in the creation of a
platform of diversified assets with strong growth prospects. The
exchange ratio premium and future growth prospects provide
significant investment value to our unitholders,” said J. Patrick
Barley, President and Chief Executive Officer. “Lynn’s extensive
experience throughout the energy value chain as well as ArcLight’s
continued support of the combined enterprise will help ensure the
future success of American Midstream.”
COMBINED ENTITY
Upon completion of the transaction, the combined partnership
will own and operate diverse midstream infrastructure
representing:
- More than 3,100 miles of gathering and
transportation pipeline,
- Over 2.5 Bcf/d of transportation
capacity,
- Six processing plants with 400 MMcf/d
of processing capacity,
- Three fractionation facilities with
20,000 bpd of capacity,
- 13.9% interest of offshore floating
production facility (FPS) in the deep-water Gulf of Mexico,
- Over six million barrels of
above-ground liquids storage capacity, and
- The third largest wholesale propane
business in the U.S.
STRATEGIC RATIONALE
The resulting benefits of the transaction are meaningful. The
strategic combination is expected to have the following
benefits:
- Increase Scale and
Diversification: Build a broader footprint, enhance competitive
position and profitability
- Expand Service Offering: Expand
operations across natural gas, refined products, crude oil and NGLs
with opportunity to capture new customers and demand
- Accelerate Growth: Increase
platform for potential third-party acquisitions due to expanded
operations and scale, potential for drop downs and partnership
opportunities with ArcLight, and growth capital availability
- Add Complementary Assets:
Leverage combined positions in the Permian; crude oil, liquids
logistics, and terminals; in addition to approximately $10 million
of run-rate synergies
- Improve Financial Position:
Substantially enhance access to sources of capital given increased
scale; creates a path to pro forma liquidity over $250 million,
with low pro forma leverage of 3.8x and improved ability to pursue
acquisitions
- Fuel Long Term Distribution
Growth: Establish path to mid-single digit distribution growth
over the long-term
KEY MERGER AGREEMENT TERMS
Under the terms of the Merger Agreement, American Midstream
common units will be issued to JP Energy public unitholders at an
exchange ratio of 0.5775:1 and to affiliates of ArcLight that hold
common units and subordinated units at an exchange ratio of
0.5225:1, resulting in a blended average exchange ratio of 0.55:1.
Consideration received by JP Energy public unitholders is
structured as a unit-for-unit exchange valued at $8.63 per common
unit based on American Midstream’s closing unit price as of October
21, 2016, representing a 14.5% premium to the closing price of JP
Energy’s common units of $7.54 on October 21, 2016 and a 14.2%
premium to the volume weighted average closing price of JP Energy
common units for the last 20 trading days ending October 21,
2016.
The general partner of JP Energy will be merged with the general
partner of American Midstream, with the general partner of American
Midstream continuing in its current form. ArcLight affiliates have
also agreed to provide additional support to the combined
partnership to achieve average annual distributable cash flow per
unit accretion of approximately 5% for 2017 and 2018. An affiliate
of ArcLight will also support the merger through reimbursement of
JP Energy’s transaction and transition costs.
The merger terms were negotiated, reviewed, and approved by the
Boards of Directors of both American Midstream and JP Energy and
the Conflicts Committee of American Midstream, which is composed
entirely of independent directors. Both Boards of Directors and the
Conflicts Committee have unanimously approved the proposed
transaction. As part of their evaluation process, the Conflicts
Committee retained independent legal and financial advisors and
received a fairness opinion from its financial advisor.
The transaction is expected to close in late 2016 or early 2017,
subject to customary closing conditions, including effectiveness of
a registration statement on Form S-4 related to the issuance of new
American Midstream units to the JP Energy unitholders, approval by
a majority of JP Energy public unitholders and regulatory
approvals. Until the closing of the proposed merger, American
Midstream and JP Energy will continue to operate independently.
HEADQUARTERS AND MANAGEMENT
The combined partnership will be headquartered in Houston,
Texas. The Board of Directors of the General Partner of American
Midstream remains unchanged.
Lynn L. Bourdon, III will serve as Chairman and Chief Executive
Officer and Eric T. Kalamaras will serve as Chief Financial Officer
of the combined Partnership.
ADVISORS
Bank of America Merrill Lynch acted as financial advisor to
American Midstream and Simmons & Company International, Energy
Specialists of Piper Jaffray acted as financial advisor to the
Conflicts Committee of American Midstream. Locke Lord LLP acted as
legal counsel to American Midstream and Thompson & Knight LLP
acted as legal counsel to the Conflicts Committee of American
Midstream. BMO Capital Markets acted as financial advisor to JP
Energy and Latham & Watkins acted as legal counsel to JP
Energy. Andrews Kurth LLP acted as legal advisor to ArcLight.
CONFERENCE CALL
American Midstream will host a conference call at 8:30 AM
Eastern Time on Monday, October 24, 2016 to discuss the
transaction. The call will be webcast and archived on American
Midstream’s website for a limited time.
Dial-In Numbers: (866) 393-4306 (Domestic toll-free)(734)
385-2616 (International)Conference ID: 6493438Webcast URL:
www.AmericanMidstream.com under Investor Relations; also available
by clicking here
Additional Information and Where to Find it
This communication relates to a proposed business combination
between American Midstream and JP Energy. In connection with the
proposed transaction, American Midstream and/or JP Energy expect to
file a proxy statement/prospectus and other documents with the
Securities and Exchange Commission (“SEC”). WE URGE INVESTORS AND
SECURITY HOLDERS TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY
OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY
AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Any definitive proxy
statement(s) (if and when available) will be mailed to unitholders
of JP Energy. Investors and security holders will be able to obtain
these materials (if and when they are available) free of charge at
the SEC’s website, www.sec.gov. In addition, copies of any
documents filed with the SEC may be obtained free of charge from JP
Energy's internet website for investors at
http://ir.jpenergypartners.com, and from American Midstream's
investor relations website at
http://www.americanmidstream.com/investor-relations. Investors and
security holders may also read and copy any reports, statements and
other information filed by American Midstream and JP Energy with
the SEC at the SEC public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or
visit the SEC’s website for further information on its public
reference room.
No Offer or Solicitation
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities, or a solicitation
of any vote or approval, nor shall there be any sale of securities
in any jurisdiction in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Participation in the Solicitation of Votes
American Midstream and JP Energy and their respective directors
and executive officers may be considered participants in the
solicitation of proxies in connection with the proposed
transaction. Information regarding JP Energy's directors and
executive officers is available in its Annual Report on Form 10-K
for the year ended December 31, 2015, filed with the SEC on
February 29, 2016. Information regarding American Midstream's
directors and executive officers is available in its Annual Report
on Form 10-K for the year ended December 31, 2016, filed with the
SEC on March 7, 2016. Other information regarding the participants
in the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become available.
About American Midstream Partners, LP
Houston-based American Midstream Partners, LP is a
growth-oriented limited partnership formed to own, operate, develop
and acquire a diversified portfolio of midstream energy assets. The
Partnership provides midstream services in Texas, North Dakota, and
the Gulf Coast and Southeast regions of the United States. For more
information about American Midstream Partners, LP, visit
www.AmericanMidstream.com.
About JP Energy Partners, LP
JP Energy Partners LP is a publicly traded, growth-oriented
limited partnership that owns, operates, develops and acquires a
diversified portfolio of midstream energy assets. JP Energy's
operations currently consist of: (i) crude oil pipelines and
storage; (ii) refined products terminals and storage; and (iii) NGL
distribution and sales, which together provide midstream
infrastructure solutions for the growing supply of crude oil,
refined products and NGLs in the United States. To learn more,
please visit JP Energy's website at www.JPEnergyPartners.com.
About ArcLight Capital Partners, LLC
ArcLight is one of the leading private equity firms focused on
North American energy infrastructure investments. Since its
establishment in 2001, ArcLight has invested approximately $17
billion across multiple energy cycles in 99 transactions.
Headquartered in Boston, Massachusetts, the firm’s investment team
brings extensive energy expertise, industry relationships, and
specialized value creation capabilities to its portfolio. More
information about ArcLight, as well as a complete list of ArcLight’
portfolio companies can be found at www.arclightcapital.com.
Forward Looking Statements
This release includes “forward-looking” statements.
Forward-looking statements are identified as any statement that
does not relate strictly to historical or current facts, including
but not limited to those related to pro-forma adjusted EBITDA,
run-rate synergies, improved scale, distributions and accretion,
actions by sponsor, closing of the transaction, liquidity, future
growth, and financial flexibility. Statements using words such as
“anticipate,” “believe,” “intend,” “project,” “plan,” “expect,”
“continue,” “estimate,” “goal,” “forecast,” “may,” “will” or
similar expressions help identify forward-looking statements.
American Midstream and JP Energy cannot give any assurance that
expectations and projections about future events will prove to be
correct. Forward-looking statements are subject to a variety of
risks, uncertainties and assumptions. These risks and uncertainties
include the risks that the proposed transaction may not be
consummated or the benefits contemplated therefrom may not be
realized. Additional risks include the following: the ability to
obtain requisite regulatory and unitholder approval and the
satisfaction of the other conditions to the consummation of the
proposed transaction, the ability of American Midstream to
successfully integrate JP Energy's operations and employees and
realize anticipated synergies and cost savings, actions by third
parties, the potential impact of the announcement or consummation
of the proposed transaction on relationships, including with
employees, suppliers, customers, competitors and credit rating
agencies, and the ability to achieve revenue and other financial
growth, and volatility in the price of oil, natural gas, and
natural gas liquids and the credit market. Actual results and
outcomes may differ materially from those expressed in such
forward-looking statements. These and other risks and uncertainties
are discussed in more detail in filings made by American Midstream
and JP Energy with the SEC, which are available for free at
www.sec.gov. American Midstream and JP Energy undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
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Investor Contacts:American Midstream Partners, LPMark
Buscovich, 713-815-3967MBuscovich@AmericanMidstream.comManager of
FinanceorJP Energy Partners LPPatrick Welch,
866-912-3714investorrelations@jpep.comExecutive Vice President
& Chief Financial Officer
JP ENERGY PARTNERS LP (NYSE:JPEP)
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