- PAA intends to recommend distribution increase to $3.20 per unit
post closing - HOUSTON, June 12 /PRNewswire-FirstCall/ -- Plains
All American Pipeline, L.P. (NYSE:PAA) announced today that it has
executed definitive agreements to acquire Pacific Energy Partners,
L.P. (NYSE:PPX). The total value of the transaction is
approximately $2.4 billion, including the assumption of debt and
estimated transaction costs, and is expected to close near the end
of 2006. The boards of directors of Plains All American Pipeline
and Pacific Energy Partners have each approved the terms of the
proposed transaction. The completion of the acquisition is subject
to the approval of the unitholders of Plains All American and
Pacific Energy as well as customary regulatory approvals, including
reviews under the Hart-Scott-Rodino Antitrust Improvements Act, and
the approvals of certain state utility commissions and Canadian
regulatory agencies. Under the terms of the agreements, Plains All
American will acquire from LB Pacific, LP and its affiliates ("LB
Pacific") the general partner interest and incentive distribution
rights of Pacific Energy as well as 2.6 million common units and
7.8 million subordinated units for a total of $700 million in cash.
In addition, Plains All American will acquire the balance of
Pacific Energy's equity through a tax-free unit-for-unit merger in
which each other unitholder of Pacific Energy will receive 0.77
newly issued Plains All American common units for each Pacific
Energy common unit. Under the terms of the contemplated
transaction, the general partner and limited partner interests in
Pacific Energy will be extinguished and Pacific Energy will be
merged into Plains All American. Pacific Energy's operating
subsidiaries will be directly or indirectly owned by Plains All
American. Plains All American's management team and board of
directors will continue in their current roles and manage the
combined company. "The PAA board of directors and executive team
see great merit in this combination with Pacific Energy. In
addition to being a synergistic, accretive and strategic business
combination, we view this as a transforming transaction -- one that
we believe positions PAA for long-term stability and growth," said
Greg L. Armstrong, Chairman and Chief Executive Officer of Plains
All American. "From an industrial logic and strategic perspective,
it is hard to imagine any two MLPs that fit better together than
Plains and Pacific." Armstrong noted that Plains All American
expects to realize near-term synergies of approximately $30 million
on an annualized basis, increasing to approximately $55 million
over the next few years, and further increasing to over $70 million
in the outer years. "Combining our respective businesses will
provide meaningful cost reduction and revenue enhancement
opportunities as well as complementary vertical integration
opportunities that will enable us to better serve our producer and
refiner customers. The transaction also has significant upside
potential in that it will allow PAA to extend its proven business
model over a broader suite of crude oil assets and operations and
also extend this business model into the refined products
business," said Armstrong. "Based upon the enhanced and extended
visibility for continued cash flow growth and accretion provided by
this transaction, effective with the first quarterly distribution
declared after closing the merger, we intend to recommend to our
board of directors an increase in our annualized distribution level
to $3.20 per unit. This represents an increase of 13% over our
current annualized distribution rate of $2.83 per unit. We believe
that we will be able to build off of this elevated distribution
level and continue to target seven to nine percent annual
distribution growth over the next several years," said Armstrong.
Irv Toole, President and Chief Executive Officer of Pacific Energy,
commented, "I am very pleased to move forward with this
transaction, which I believe will be extremely attractive to
Pacific Energy unitholders. Based on the 0.77 exchange ratio and
the closing unit prices of the respective partnerships on June 9,
2006, Pacific Energy unitholders are receiving a market premium of
approximately 10.6%. Based on the 20-day average closing prices of
the respective partnerships, Pacific Energy unitholders are
receiving a market premium of approximately 14.3%. In addition,
based on an annualized distribution for Plains All American of
$3.20 per unit after the transaction closes, Pacific Energy
unitholders will receive an equivalent distribution of $2.464 per
unit, which represents an increase in their annualized distribution
of 8.5% over the current level of $2.27 per unit. When these two
components are combined, Pacific Energy unitholders are receiving a
total near-term premium in the range of approximately 19.1% to
22.8%, assuming a constant unit price-to-distribution yield." Toole
continued, "Going forward, the combined company will have one of
the most visible distribution growth profiles in the MLP sector,
which extends out several years and is driven by high-quality
internal growth projects from both partnerships and synergies from
this transaction. In addition, we believe the combined partnership
will be generating meaningful excess cash flow which can be used to
reinvest in its business and reduce its reliance on outside equity
sources." Armstrong noted that Plains All American's general
partner, in support of the transaction, agreed to reduce its
incentive distributions by $20 million in 2007, $15 million in
2008, $15 million in 2009, $10 million in 2010 and $5 million in
2011, based on a year-end 2006 closing and a simultaneous increase
in the annualized distribution to $3.20 per unit. "The profile of
these reductions in the general partner's incentive distributions
complements the increasing cash flow profile provided by the
ramp-up in synergies and growing contributions from internal growth
projects that come on-stream over the next five years. This action
is a clear demonstration of our general partner's focus on the
long-term success of the partnership and its willingness to help us
grow," said Armstrong. Phil D. Kramer, Plains All American's EVP
and Chief Financial Officer, noted that PAA intends to fund at
least 50% of the acquisition with equity, which equates to
approximately $1.2 billion. Approximately $1.0 billion, or 88%, of
the total equity funding required to meet that minimum equity
funding objective, will be accomplished by virtue of the
unit-for-unit exchange feature of the transaction and
contemporaneous capital contribution by the general partner. PAA
intends to monitor the public and private equity markets for
favorable opportunities to complete the remaining equity component.
The remaining $1.2 billion will be funded with debt, of which
nearly 36% will be met through Plains All American's assumption of
Pacific's two issuances of senior notes having an aggregate
principal amount of $425 million. The remaining $770 million of
acquisition-related debt capital will initially be provided by
either Plains All American's existing revolving credit facility or
short-term credit facilities to be implemented that ensure optimal
liquidity and flexibility in the interim period. Kramer noted that
at March 31, 2006, pro forma for subsequent equity and debt
financings, second-quarter acquisitions that have closed and the
recently-announced pipeline acquisition from BP Oil Pipeline
Company, Plains All American had approximately $618 million of
available liquidity on its existing $1 billion credit facility,
which can be expanded by $500 million, subject to additional lender
commitments. On a permanent basis, Plains All American intends to
fund this debt through the issuance of senior notes of varying
maturities. In order to provide the financial community with
updated information on Plains All American and thereby enable the
unitholders of Plains All American and Pacific Energy to better
assess the impact and merits of this combination, Plains All
American also furnished today an 8-K that updated Plains All
American's stand-alone guidance for the second half of 2006. In
addition, the 8-K also provides preliminary Adjusted EBITDA
guidance for 2007 that, excluding any contribution from the pending
merger with Pacific, incorporates the full-year benefits of Plains
All American's 2006 recent acquisition activities and also
incorporates contributions from internal growth capital projects
currently in progress. Financial advisors for this transaction are
as follows: (1) Simmons & Company International for Plains All
American; (2) Petrie Parkman & Co. for the conflicts committee
of the board of the managing general partner of Pacific Energy; and
(3) Lehman Brothers for LB Pacific, LP and Pacific Energy. Legal
counsels are as follows: (1) Vinson & Elkins LLP and Prickett,
Jones & Elliott, P.A. for Plains All American; (2) Richards
Layton & Finger, P.A. for the conflicts committee of the board
of the managing general partner of Pacific Energy; (3) Andrews
Kurth LLP for Pacific Energy; and (4) Baker Botts L.L.P. and
Morris, Nichols, Arsht & Tunnell LLP for LB Pacific, LP. Plains
All American and Pacific Energy will host a conference call at
10:00am Central Time today, June 12, 2006, to discuss this
transaction. To participate in the call, please dial 877-709-8150
at approximately 9:55am Central Time; no password or reservation
number is required. To access the live internet webcast, please go
to PAA's website at http://www.paalp.com/, choose "Investor
Relations", and then choose "Conference Calls". In addition, to
access a slide presentation to be used in conjunction with the
call, choose "Partnership Presentations" from the "Investor
Relations" page on the website. Plains All American Pipeline, L.P.
is engaged in interstate and intrastate crude oil transportation
and crude oil gathering, marketing, terminalling and storage, as
well as the marketing and storage of liquefied petroleum gas and
other petroleum products, in the United States and Canada. Through
its 50% ownership in PAA/Vulcan Gas Storage LLC, the Partnership is
also engaged in the development and operation of natural gas
storage facilities. The Partnership's common units are traded on
the New York Stock Exchange under the symbol "PAA." The Partnership
is headquartered in Houston, Texas. Pacific Energy Partners, L.P.
is a master limited partnership headquartered in Long Beach,
California. Pacific Energy is engaged principally in the business
of gathering, transporting, storing and distributing crude oil,
refined products and other related products. Pacific Energy
generates revenues by transporting such commodities on its
pipelines, by leasing capacity in its storage facilities and by
providing other terminalling services. Pacific Energy also buys and
sells crude oil, activities that are generally complementary to its
crude oil operations. Pacific Energy conducts its business through
two business units, the West Coast Business Unit, which includes
activities in California and the Philadelphia, PA area, and the
Rocky Mountain Business Unit, which includes activities in five
Rocky Mountain states and Alberta, Canada. Investor Notice Plains
All American Pipeline, L.P. and Pacific Energy Partners, L.P. will
file a joint proxy statement/prospectus and other documents with
the Securities and Exchange Commission in relation to this
transaction. Investors and security holders are urged to read
carefully these documents when they become available because they
will contain important information regarding Plains All American
Pipeline, L.P., Pacific Energy Partners, L.P. and the merger. A
definitive joint proxy statement/prospectus will be sent to
security holders of Plains All American Pipeline, L.P. and Pacific
Energy Partners, L.P. seeking their approval of the transactions
contemplated by the merger agreement. Investors and security
holders may obtain a free copy of the joint proxy
statement/prospectus (when it is available) and other documents
containing information about Plains All American Pipeline, L.P. and
Pacific Energy Partners, L.P., without charge, at the SEC's website
at http://www.sec.gov/. Copies of the joint proxy
statement/prospectus and the SEC filings that will be incorporated
by reference in the joint proxy statement/prospectus may also be
obtained free of charge by directing a request to the respective
partnerships as follows: Information regarding Plains All American
Pipeline can be obtained by contacting its investor relations
department at 713-646- 4100 or by accessing its website at
http://www.paalp.com/, and information regarding Pacific Energy
Partners can be obtained by contacting its investor relations
department at 562-728-2871 or by accessing its website at
http://www.pacificenergy.com/ . Plains All American Pipeline, L.P.
and Pacific Energy Partners, L.P. and the officers and directors of
the respective general partners of Plains All American Pipeline,
L.P. and Pacific Energy Partners, L.P. may be deemed to be
participants in the solicitation of proxies from their security
holders. Information about these persons can be found in Plains All
American Pipeline, L.P.'s and Pacific Energy Partners, L.P.'s
respective Annual Reports on Form 10-K and Form 10-K/A filed with
the SEC, and additional information about such persons may be
obtained from the joint proxy statement/prospectus when it becomes
available. This document shall not constitute an offer to sell or
the solicitation of an offer to buy any securities, 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 the Securities Act of 1933,
as amended. Cautionary Statement Regarding Forward Looking
Statements Certain statements made herein are forward-looking
statements under the Private Securities Litigation Reform Act of
1995. They include statements regarding the timing and expected
benefits of the business combination transaction involving PAA and
Pacific Energy, including expected commercial and operational
synergies over time, cash flow growth and accretion, future
distribution increases and growth, incentive distribution
reductions, internal growth projects, future issuances of debt and
equity securities, and other objectives, expectations and
intentions and other statements that are not historical facts.
These statements are based on the current expectations and
estimates of the management of PAA and Pacific Energy and their
general partners; actual results may differ materially due to
certain risks and uncertainties. Although PAA, Pacific Energy and
their general partners believe that such expectations reflected in
such forward-looking statements are reasonable, they cannot give
assurances that such expectations will prove to be correct. For
instance, although PAA and Pacific Energy have signed a merger
agreement, there is no assurance that they will complete the
proposed merger. The merger agreement will terminate if PAA and
Pacific Energy do not receive the necessary approval of their
unitholders, and also may be terminated if the parties fail to
satisfy conditions to closing. Other risks and uncertainties that
may affect actual results include PAA's failure to successfully
integrate the respective business operations upon completion of the
merger or its failure to successfully integrate any future
acquisitions; the failure to realize the anticipated cost savings,
synergies and other benefits of the proposed merger; refinery
downtime; unusual weather patterns; continued creditworthiness of,
and performance by, counterparties; the effects of competition; the
success of risk management activities; commodity price
fluctuations; reductions in the production of, or demand for, crude
oil that we purchase, gather or transport; releases of crude oil
into the environment; fluctuations in the capital markets;
regulatory changes; and other factors and uncertainties discussed
in PAA's and Pacific Energy's filings with the Securities and
Exchange Commission, including their Annual Reports on Form 10-K
and Form 10-K/A for the year ended December 31, 2005. DATASOURCE:
Plains All American Pipeline, L.P. CONTACT: Phillip D. Kramer,
Executive Vice President and CFO, +1-713-646-4560, or Brad A.
Thielemann, Manager, Special Projects, +1-713-646-4222, both of
Plains All American Pipeline, L.P., 800-564-3036; Gerry Tywoniuk,
Senior Vice President and CFO, +1-562-728-2890, or Jennifer S.
Shigei, Manager, Investor Relations, +1-562-728-2871, both of
Pacific Energy Partners, L.P. Web site: http://www.paalp.com/
http://www.pacificenergy.com/
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