By RTT News, October 09, 2013, 08:48:00 PM EDT
(RTTNews.com) - Buckeye Partners, L.P. ( BPL ), an operator of refined petroleum product pipeline systems, said Wednesday that it has agreed to acquire 20 liquid petroleum products terminals with total storage capacity of about 39 million barrels from independent energy company Hess Corp. ( HES ) for $850 million in cash.
Houston, Texas-based Buckeye Partners noted that the acquisition of the marine terminals located on the East Coast and the Caribbean will expand its footprint into several key, high growth markets in the Southeast, including Florida.
The 19 domestic terminals are located primarily in major metropolitan locations along the U.S. East Coast and have about 29 million barrels of refined petroleum products storage capacity. This includes about 15 million barrels of capacity strategically located in New York Harbor.
The terminal on St. Lucia in the Caribbean has about 10 million barrels of crude oil and refined petroleum products storage capacity and also has deep-water access. The company noted that all but two of the facilities are marine terminals and twelve have deep-water access.
Clark Smith, President and Chief Executive Officer of Buckeye Partners said, "This acquisition is a tremendous opportunity for Buckeye to create value by overlaying our commercial operating model on a premier platform of complementary assets. We have a proven track record of value creation through executing on opportunities to apply the Buckeye model to terminals previously operated primarily on a proprietary basis such as these."
Buckeye expects the acquisition to close before year-end. The acquisition, which includes a multi-year storage and throughput commitment by Hess, will be immediately accretive to Buckeye Partners' distributable cash flow per unit, excluding first year transition-related expenses. The company also expects the deal will provide long-term support for further distribution growth.
UBS acted as the exclusive financial advisor to Buckeye in connection with this transaction.
In a separate statement, New York-based Hess said that as a result of the sale of the terminal network to Buckeye Partners, it expects to release about $900 million of working capital. Meanwhile, the company's retail business will retain another $100 million of working capital as part of its ongoing operations.
Hess noted that the sale of the terminal network, along with the sales of four upstream producing assets completed earlier this year as well as the announced sale of the Energy Marketing business, brings its total year-to-date divestitures to $5.4 billion. Hess has announced significant asset divestitures as part of its transformation to a pure play exploration and production company.
Hess has used the initial proceeds from its completed asset sales primarily to repay debt and to further strengthen its balance sheet. Subsequently, the company started purchasing shares under its $4 billion share repurchase authorization. The company also intends to use proceeds from the sale as well as working capital released by the sale of its terminal network to continue this program.
Separately, Buckeye Partners said it has commenced a public offering of 6.50 million limited partnership units representing limited partner interests or LP units, pursuant to an effective shelf registration statement. The company expects to grant the underwriters an option to purchase up to 975 thousand additional LP units.
Buckeye intends to use the net proceeds from the offering to fund indirectly a part of the purchase price for the marine terminals acquisition. Pending such use, Buckeye also intends to use the net proceeds to reduce the debt outstanding under its revolving credit facility and for general partnership purposes.
Barclays, Morgan Stanley, UBS Investment Bank, Wells Fargo Securities, Deutsche Bank Securities and J.P. Morgan are acting as joint book-running managers of the LP Unit offering, while Jefferies, RBC Capital Markets and SunTrust Robinson Humphrey are acting as the co-managers.
BPL closed Wednesday's trading at $64.35, down $0.09 or 0.14 percent on a volume of 318,601 shares. HES closed trading at $78.53, down $0.24 or 0.30 percent on a volume of 2.85 million shares.
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