Tallgrass Energy Partners LP announced that Tallgrass Development LP has offered it the right to purchase a 33.3% interest in Tallgrass Pony Express Pipeline LLC. If acquired, Tallgrass Energy would own a 66.7% interest in the pipeline. Terms of the offer have not been finalized and may be modified after the ongoing open seasons for the expansion of the Pony Express crude oil pipeline system are complete. In conjunction with the proposed transaction, the parties expect to seek clearance from the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Act.
Pony Express is a crude oil pipeline traversing about 690 miles from Guernsey, Wyo., to Cushing, Okla., with delivery points at the Ponca City Refinery and at Deeprock in Cushing. When ongoing construction is completed, Pony Express will also own a 66-mile lateral in northeast Colorado commencing in Weld County and interconnecting with the Pony Express mainline just east of Sterling. The Colorado lateral is expected to enter service sometime during the first half of 2015. Pony Express is currently undergoing open seasons to solicit commitments for incremental crude transportation service expected to be operational in the second half of 2016, with interim capacity of about 100,000 barrels per day available beginning in mid-2015.
The offer was received pursuant to a right of first offer that is contained in the omnibus agreement between Tallgrass Energy and Tallgrass Development in connection with Tallgrass Energy’s May 2013 IPO. To evaluate the offer, a conflicts committee of the board of directors of Tallgrass Energy’s general partner, consisting solely of independent directors, has been formed. The committee will also engage external advisors to aid in the evaluation. No definitive transaction agreement has been executed yet, and the proposed transaction remains subject to review, negotiations and approval by the conflicts committee and by the board of directors of Tallgrass Energy’s general partner.
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