Enterprise Products Partners LP (EPD) Wednesday said it has purchased a stake in Oiltanking Partners LP (OILT) for about $4.41 billion in a cash-and-stock deal. The natural gas drilling and processing company also made an offer to buy the rest of the stake in Oiltanking Partners.
Houston, Texas-based Enterprise Products Partners acquired a stake of 64.7 percent of limited partner interest and 2 percent of general partner interest of Oiltanking Partners from its holding partner Oiltanking Holdings Americas, a unit of Oiltanking Gmbh, for $2.21 billion cash and 54.8 million Enterprise common units, or about $2.2 billion in stock.
Enterprise also submitted a proposal to buy rest of Oiltanking Partners' stake in exchange for 1.23 Enterprise units for each Oiltanking Partners unit, which would value the deal at $1.4 billion. The total consideration for the two transactions would be about $6.0 billion, Enterprise said.
Enterprise CEO Michael Creel said, "We are pleased to announce this two-step transaction that would result in the merger of Oiltanking Partners into Enterprise. We have had a strategic relationship and enjoyed mutual growth with Oiltanking Partners and its predecessors since 1983."
"The combination of Enterprise's system of midstream assets and Oiltanking Partners' access to waterborne markets and crude oil and petroleum products storage assets would extend and broaden Enterprise's midstream energy services business," Creel added.
Creel said the merger would result in cost savings and synergies of at least $30 million, opportunities for new business and control of Oiltanking Partners' assets that are essential to midstream business.
Enterprise said it is Oiltanking Partners' largest customer, representing about 30 percent of its sales in 2013. Oiltanking Holding is wholly owned by an affiliate of Oiltanking GmbH, the world's second largest independent storage provider for crude oil, refined products, liquid chemicals and gases.
Enterprise expect the acquisition to be accretive to its distributable cash flow per unit beginning in 2016.
"Oiltanking Holdings has been providing Enterprise with a variety of services in the Gulf Coast for more than 30 years and this transaction will continue our long-term relationship, but now as an Enterprise unitholder," said Christian Flach, managing director of Oiltanking GmbH, who has also been named as a director of Enterprise's general partner.
EPD is currently trading at $40.46, up $0.16 or 0.40%, on the NYSE.
OILT is currently trading at $50.65, up $1.06 or 2.14%, on the NYSE.
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