Houston Fuel Oil Terminal Company / Houst Ship Channel
SemGroup
Corporation announced that it has executed a definitive agreement to
acquire Houston Fuel Oil Terminal Company (“HFOTCO”), one of the largest
oil terminals in the U.S., from investment funds managed by Alinda
Capital Partners. This acquisition establishes SemGroup’s position in
the premier energy market, the Houston Ship Channel.
The 16.8-million-barrel terminal is strategically located on
the U.S. Gulf Coast with pipeline connectivity to the local refining
complex, deep water marine access and inbound pipeline, rail and truck
receipt capabilities from all major producing basins. The assets are
located on 330 acres on the Houston Ship Channel, one of the most active
trading centers for residual fuel oil and crude oil in the world. The
business is fully supported by take-or-pay contracts with primarily
investment-grade counterparties that have been customers for an average
of 15 years. HFOTCO is currently executing on
contractually supported growth projects, including a new ship dock, a
new pipeline and connections, as well as an additional 1.45 million
barrels of crude oil storage, expected to be in service mid-2018.
“This is a transformational acquisition that adds tremendous
stability to our business and provides a dynamic platform for growth,”
said SemGroup President and CEO Carlin Conner. “Consistent with our
strategy to diversify our portfolio and become more refinery facing, HFOTCO
brings a well-established base of high-quality, long-tenured customers.
At the same time, the terminal’s premier location on the Houston Ship
Channel provides deep water access and is well positioned to capture
increasing export volumes. With the addition of HFOTCO, SemGroup will be
uniquely positioned to capture the future trends in exporting crude oil
and refined products resulting from the near and long-term anticipated
growth in U.S. shale production.”
The total purchase consideration to acquire HFOTCO
will consist of two payments. The first payment will be $1.5 billion at
closing, including the assumption of an estimated $785 million of
existing HFOTCO debt, and issuance of between $300 million to $400
million in common shares, at SemGroup’s election, to Alinda
at $32.30 per share. The remainder of the initial payment will be funded
in cash from SemGroup’s revolving credit facility. The second payment
will consist of an additional $600 million which will be paid in cash
before the end of 2018, which aligns consideration with EBITDA growth.
SemGroup will have no obligation to make the second payment, which
instead will be an obligation of its acquisition subsidiaries and
secured by a pledge of the equity interests in such subsidiaries. The
purchase price will be subject to customary adjustments.
Chris Beale, Managing Partner of Alinda Capital Partners, commented:
“The HFOTCO management team has done an excellent job of growing and
diversifying a world-class terminal business. We believe that adding
this asset to SemGroup’s portfolio is a great way to leverage customer
relationships, strengthen both businesses and create additional
shareholder value.”
The acquisition is expected to close in the third quarter of 2017,
subject to the receipt of certain governmental approvals and the
satisfaction of other customary closing conditions.
SemGroup intends to maintain HFOTCO’s workforce and
anticipates that the company’s approximately 125 employees will become
members of the SemGroup family upon the transaction’s close.
“A large part of HFOTCO’s success has been its outstanding team,”
Conner said. “We’re looking forward to these talented employees becoming
part of the SemGroup team.”
Senior management at both SemGroup and HFOTCO have
several decades of combined experience managing terminalling and
logistics assets in the U.S. and abroad. SemGroup currently operates 7.6
million barrels of crude oil storage in Cushing and another 8.7 million
barrels of multi-product storage in Milford Haven, U.K. Prior to
SemGroup, CEO Carlin Conner spent more than 20 years in the terminal
industry, most recently as managing director of Oiltanking GmbH, an
independent worldwide storage provider based in Germany.
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