Boardwalk Pipelines Holding Corp., a wholly owned unit of
Boardwalk Pipeline Partners LP
) have formed an alliance to acquire PL Midstream LLC., as per
media reports. The purchase consideration of the pipeline
transportation company is $625 million.
BOARDWALK PIPLN (BWP): Free Stock Analysis
LOEWS CORP (L): Free Stock Analysis Report
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The transaction is expected to culminate by the end of the third
quarter or beginning of the fourth quarter of 2012, pending closing
Boardwalk Pipelines Holding will own 67% of the JV and Boardwalk
Pipeline Partners will own the remaining 33%. PL Midstream will be
purchased from PL Logistics LLC, a portfolio company of private
equity firm, Lindsay Goldberg LLC.
The purchase consideration will constitute Boardwalk Pipelines
Holding's $268 million for equity ownership, Boardwalk Pipeline
Partners' $132 million for its equity interest and a 5 year bank
loan of $225 million.
Boardwalk Pipeline Partners believes this acquisition will support
its diversification strategy as it will help it venture into the
natural gas liquids business. Natural gas liquids business
complements Boardwalk's core natural gas pipeline and storage
Natural gas is usually an attractive choice because of its relative
fuel efficiency, low emissions, quick construction timelines and
low capital costs. There is an abundance of natural gas in the U.S.
markets, resulting in lower prices. This trend is encouraging power
generators to not only convert their existing plants to gas-fired
ones but to build new nat-gas units. As per Energy Information
Administration's reports, 96.65 gigawatt of new electric generation
will be added in the U.S. within 2009 -2015, out of which 20% will
be natural gas-fired plants.
PL Midstream boasts of assets that can capitalize on the
petrochemicals boom in the U. S. Gulf Coast region. Also, it has
53.5 million barrels of salt dome storage capacity that includes
11.2 billion cubic feet of working natural gas storage capacity,
brine supply infrastructure and 240 miles of pipeline
transportation assets. Additionally, it has fee based contracts
with an average lifespan of 10 years.
In the second quarter earnings, contribution to Loews improved
almost 5 times to $25 million. The improvement was fueled by higher
contribution from Boardwalk HP Storage Company and the prior-year
impact of an impairment charge related to steel pipe materials. We
expect this acquisition to help continue delivering robust earnings
by leveraging its asset position.
Both Loews Corporation and Boardwalk Pipeline Partners LP share a
Zacks #3 Rank (short-term Hold rating), indicating no clear
directional pressure on the stock over the near term.