Shares of specialty chemical maker
) screamed higher after it reported that its fully-owned
subsidiary - Westlake Chemical Partners LP - has submitted a
registration statement with the U.S. Securities and Exchange
Commission (SEC) pertaining to its planned initial public
offering (IPO) of common units.
Chemical Partners is a master limited partnership (MLP)
subsidiary which Westlake recently created to operate facilities
that convert natural gas liquid feedstocks (primarily ethane) to
ethylene, a major petrochemical building block used to make an
array of derivatives utilized across a vast spectrum of end-use
markets including packaging, construction and transportation.
MLPs are tax-advantaged entities that offer relatively higher
income distributions to their shareholders.
Texas-based Westlake's shares shoot up as much as around 14% in
the trading session following the announcement to clock a new
52-week high of $73.38. The stock pulled back to eventually close
at $70.53 yesterday, gaining nearly 10%. Westlake's shares are up
around 16% so far this year.
Chemical Partners' initial assets will be comprised of the
general partner interest and a part of the limited partner
interest in Westlake Chemical OpCo LP, an entity which will own
and operate ethylene production and pipeline assets.
According to the regulatory filing, the assets of OpCo, a
partnership between Westlake and Chemical Partners, will consist
of three (two at Westlake's Lake Charles, LA facility and one at
its Calvert City, KY complex) ethylene production facilities with
total annual capacity of roughly 3.4 billion pounds and a
200-mile ethylene pipeline. OpCo will earn majority of its
revenues from its ethylene production facilities.
Chemical Partners plans to apply for listing its common units on
the NYSE under the symbol "WLKP." The entity plans to raise
roughly $271.7 million from the IPO, as per the filing. However,
the number of units to be offered in the proposed IPO and their
price range have not been determined yet. Barclays Capital and
UBS Securities will serve as joint book-running managers for the
Westlake said that it will own the general partner of Chemical
Partners and all of its incentive distribution rights. It will
also own a 90% limited partner interest in OpCo following the
completion of the IPO. Moreover, Westlake will enter into a
12-year ethylene sales pact with OpCo, under which, the former
will buy 95% of OpCo's planned ethylene production annually.
Westlake saw its profit for the fourth quarter of 2013 catapult
roughly 79% year over year to a record $171 million as it gained
from higher pricing for several of its products and lower cost
ethane-based ethylene production stemming from North American
natural gas liquids production.
Westlake expects continued cost benefits from North American
shale gas production. The company remains committed to invest to
capture this cost advantage.
Westlake, a Zacks Rank #2 (Buy) stock, will report its
first-quarter results on May 5.
Other specialty chemical stocks worth considering include
Kraton Performance Polymers Inc.
A. Schulman, Inc.
) with all retaining a Zacks Rank #2 (Buy).
KRATON PERFORM (KRA): Free Stock Analysis
POLYONE CORP (POL): Free Stock Analysis
SCHULMAN(A) INC (SHLM): Free Stock Analysis
WESTLAKE CHEM (WLK): Free Stock Analysis
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