JP Energy Partners LP units enjoyed an immediate 10% bounce following the announcement that it had bought American Midstream Partners in a $2-billion all-stock deal.
Denver-based American Midstream was No. 45 on the Midstream Business ranking of The Midstream 50 earlier in the year, based on 2015 EBITDA. JP Energy Partners was No. 48. After closing, the combined entity, to be based in Houston, expects an EBITDA of about $185 million. That would bump JP No. 37 on the list.
“This is not just a transformative event, it’s an evolutionary change,” Lynn Bourdon III, American Midstream’s chairman, president and CEO, said during a conference call.
Bourdon listed substantive extensions in the areas of terminals, crude oil, NGL and transportation.
Larger scale was also on the mind of J. Patrick Barley, president and CEO of JP Energy, who told analysts on the call that difficult market conditions had shown the value of size and geographical presence. He added that the combined company would enjoy strong positions in the Permian Basin, Eagle Ford Shale, Gulf Coast and Bakken Shale.
The deal involves a 14.5% premium based on JP Energy’s unit price at the close of trading before the announcement. ArcLight Capital Partners LLC, which owns 15.59% of American Midstream and 19.83% of JP Energy, according to Bloomberg, will provide up to $25 million in merger support and reimburse JP Energy’s transaction and transition costs.
The companies expect annual savings of $10 million as a result of eliminating duplication, and hope to develop a more flexible capital structure of up to $250 million to support growth. The combined company will operate more than 3,100 miles of gathering and transportation pipelines.
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