Enterprise Products Partners L.P. (NYSE: EPD, “Enterprise”)
announced today that it has acquired the general partner and
related incentive distribution rights, 15,899,802 common units and
38,899,802 subordinated units in Oiltanking Partners L.P. (NYSE:
OILT, “Oiltanking Partners”) held by Oiltanking Holding Americas,
Inc. (“Oiltanking Holding”). Enterprise paid total consideration of
approximately $4.41 billion to Oiltanking Holding comprised of
$2.21 billion in cash and 54,807,352 Enterprise common units.
Enterprise also paid $228 million to assume notes receivable issued
by Oiltanking Partners.
Upon the payment of the Oiltanking Partners’ distribution with
respect to the third quarter of 2014, which is expected to be paid
in mid-November 2014, the subordination period with respect to the
Oiltanking Partners subordinated units will end. At that time, the
subordinated units will convert into common units on a one-for-one
basis. Upon conversion, Enterprise will own 54,799,604 common
units, or approximately 66 percent of Oiltanking Partners’ then
outstanding common units.
In a second step, Enterprise submitted a proposal to the
conflicts committee of the general partner of Oiltanking Partners
to merge Oiltanking Partners with and into Enterprise. Under the
terms of the proposal, Enterprise would exchange 1.23 Enterprise
common units for each Oiltanking Partners common unit. This
proposed consideration represents an at-market value for Oiltanking
Partners common units based upon the volume weighted average
trading prices of both Oiltanking Partners and Enterprise on
September 30, 2014. The total consideration for this proposal would
be $1.4 billion. The total consideration for step 1 and step 2, as
proposed, would be approximately $6.0 billion.
Oiltanking Partners owns marine terminals on the Houston Ship
Channel and the Port of Beaumont with a total of twelve ship and
barge docks and approximately 24 million barrels of crude oil and
petroleum products storage capacity on the Texas Gulf Coast.
“We are pleased to announce this two-step transaction that would
result in the merger of Oiltanking Partners into Enterprise,” said
Michael A. Creel, chief executive officer of the general partner of
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. This combination
would benefit our producing and consuming customers by enhancing
their respective access to supplies, domestic and international
markets, and storage.”
“We believe there would be three principle avenues for long-term
value creation from the merger of Oiltanking Partners into
Enterprise: (1) at least $30 million of synergies and cost savings
from the complete integration of Oiltanking Partners’ business into
Enterprise’s system; (2) opportunities for new business and
repurposing existing assets for ‘best use’ to meet the growing
demand for export and logistical services for petroleum products
related to the increase in North American crude oil, condensate and
NGL production from the shale and non-conventional plays; and (3)
securing ownership and control of Oiltanking Partners’ assets that
are essential to our midstream business. We believe the acquisition
of Oiltanking Partners would be accretive to Enterprise’s
distributable cash flow per unit beginning in 2016,” stated
Creel.
Oiltanking Partners’ marine terminal on the Houston Ship Channel
is connected with Enterprise’s Mont Belvieu facility and integral
to our growing LPG export, octane enhancement and propylene
businesses. Enterprise has loaded or unloaded over 3,500 ships with
more than 600 million barrels of LPG across Oiltanking Partners’
docks over the past thirty-one years. Enterprise’s ECHO facilities
are also connected to Oiltanking’s system.
Enterprise is Oiltanking Partners’ largest customer,
representing approximately 30 percent of Oiltanking Partners’ 2013
revenue. We estimate that approximately 40 percent of Oiltanking
Partners’ 2013 earnings before interest, taxes, depreciation and
amortization were attributable to Enterprise.
This proposed combination would convert essential dock and land
access associated with our LPG export and octane enhancement
business from a services agreement to ownership. These two
businesses accounted for approximately 10 percent of Enterprise’s
gross operating margin in 2013. We expect the contribution from
these businesses to increase in association with volume growth
related to the completion of expansions of our LPG export facility
in 2015 and 2016 and improvements to our octane enhancement
facility in 2015. Upon completion of the expansions of our LPG
export facility in 2016, we estimate that Enterprise will have over
$1.5 billion of assets on land currently owned by Oiltanking
Partners.
Enterprise paid $228 million to an affiliate of Oiltanking
Holding to purchase notes receivables and accrued interest thereon
due from Oiltanking Partners and its subsidiaries. These notes
include (1) the $125 million 4.55 percent note payable by
Oiltanking Houston, L.P. due 2022; (2) the $50 million 5.435
percent note payable by Oiltanking Houston, L.P. due 2023; (3) the
outstanding $37 million balance associated with Oiltanking
Partners’ $150 million revolving credit facility with a maturity
date of November 30, 2017; as well as the remaining notes payable
outstanding. The assigned notes and credit facility have been
amended to reflect Enterprise Products Operating LLC as the lender.
The material terms of these amended notes and credit facility are
substantially the same as those of the previous notes and credit
facility.
Enterprise funded the total cash consideration of $2.438 billion
from cash on hand and borrowings under its commercial paper
facility and a new $1.5 billion 364-day revolving credit facility.
The new 364-day facility matures in September 2015.
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. Christian
Flach has been named as a director of Enterprise’s general partner.
Dr. Flach is managing director of Oiltanking GmbH and was formerly
chairman of the board of the general partner of Oiltanking
Partners.
Today, Enterprise, as sole member of the general partner of
Oiltanking Partners, named four new directors to the board of
directors of Oiltanking Partners’ general partner. Gregory C. King,
Thomas M. Hart III and D. Mark Leland will continue to serve as
independent directors of the board of Oiltanking Partners’ general
partner and comprise its conflicts committee. Mr. King is chair of
the conflicts committee.
Merger Proposal; Benefits to Public Holders of Oiltanking
Partners Common Units
Enterprise also today announced a proposal to merge a
wholly-owned subsidiary of Enterprise with Oiltanking Partners. The
proposed merger would occur in a unit-for-unit exchange, at a ratio
of 1.23 Enterprise common units for each outstanding Oiltanking
Partners common unit. This non-taxable exchange represents an
at-market value for Oiltanking Partners common units based on the
volume weighted average trading prices of both Oiltanking Partners
and Enterprise common units on September 30, 2014.
The terms of the Proposed Merger will be subject to negotiation,
review and approval by the board of directors of the general
partner of Enterprise, and the conflicts committee of the board of
directors of the general partner of Oiltanking Partners. The
Proposed Merger will also be subject to approval by holders of
Oiltanking Partners common units in accordance with the Oiltanking
Partners partnership agreement. Enterprise cannot predict whether
the terms of a potential combination will be agreed upon by the
conflicts committee of the board of directors of the general
partner of Oiltanking Partners or the board of directors of the
general partner of Enterprise.
Enterprise believes the proposal should be attractive to public
holders of Oiltanking Partners common units. It would permit
Oiltanking Partners unitholders to participate in the future growth
of Enterprise’s businesses (including Oiltanking Partners’ existing
business), Enterprise’s substantial backlog of capital projects and
larger, more diversified asset base. It would also allow Oiltanking
Partners unitholders to benefit from Enterprise’s financial
flexibility, investment grade credit rating and access to capital
markets.
At the proposed exchange rate, public unitholders of Oiltanking
Partners would receive a 70 percent increase in cash distributions
based on the respective cash distributions per unit paid by
Enterprise and Oiltanking Partners in August 2014 with respect to
the second quarter of 2014. The combination would also provide
public holders of Oiltanking Partners common units a more liquid
security. Enterprise’s 2014 average daily trading volume for its
common units, through September 30, was approximately 2.1 million
units per day compared to approximately 84 thousand units per day
for Oiltanking Partners common units for the same period.
Enterprise does not intend to comment further on discussions
unless and until a definitive agreement is reached.
Investor Conference Call
Enterprise will hold a conference call with investors at 10:00
a.m. EDT Wednesday, October 1, 2014 to discuss the substance of
this press release. A presentation and a link to the live webcast
will be available at www.enterpriseproducts.com shortly before
10:00 a.m. EDT. Participants should access the website at least ten
minutes prior to the start of the conference call to download and
install any necessary audio software.
Advisors
Citi acted as financial advisors and Andrews Kurth LLP and Akin
Gump Strauss Hauer & Feld LLP acted as legal counsel to
Enterprise. Additionally, Citi acted as lead arranger for
Enterprise’s new $1.5 billion 364-day revolving credit
facility.
Enterprise Products Partners L.P. is one of the largest publicly
traded partnerships and a leading North American provider of
midstream energy services to producers and consumers of natural
gas, NGLs, crude oil, refined products and petrochemicals. Our
services include: natural gas gathering, treating, processing,
transportation and storage; NGL transportation, fractionation,
storage and import and export terminals (including liquefied
petroleum gas or LPG); crude oil and refined products
transportation, storage and terminals; offshore production
platforms; petrochemical transportation and services; and a marine
transportation business that operates primarily on the United
States inland and Intracoastal Waterway systems and in the Gulf of
Mexico. Additional information regarding Enterprise can be found on
its website, www.enterpriseproducts.com.
This press release includes "forward-looking statements" as
defined by the U.S. Securities and Exchange Commission (the “SEC”).
All statements, other than statements of historical fact, included
herein that address activities, events, developments or
transactions that Enterprise expects, believes or anticipates will
or may occur in the future, including anticipated benefits and
other aspects of such activities, events, developments or
transactions, are forward-looking statements. These forward-looking
statements are subject to risks and uncertainties that may cause
actual results to differ materially, including approval of the
proposed merger by Oiltanking Partners’ conflicts committee and
unitholders, any approvals by regulatory agencies, the possibility
that the anticipated benefits from such activities, events,
developments or transactions cannot be fully realized, the
possibility that costs or difficulties related thereto will be
greater than expected, the impact of competition and other risk
factors included in the reports filed with the SEC by Enterprise.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their dates.
Except as required by law, Enterprise does not intend to update or
revise its forward-looking statements, whether as a result of new
information, future events or otherwise.
ADDITIONAL INFORMATION
This communication does not constitute an offer to buy or
solicitation of an offer to sell any securities. This communication
relates to a proposal which Enterprise has made for a business
combination transaction with Oiltanking Partners. In furtherance of
this proposal and subject to future developments, Enterprise (and,
if a negotiated transaction is agreed, Oiltanking Partners) may
file one or more registration statements, proxy statements or other
documents with the SEC. This communication is not a substitute for
any proxy statement, registration statement, prospectus or other
document Enterprise and/or Oiltanking Partners may file with the
SEC in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS OF ENTERPRISE AND OILTANKING PARTNERS ARE URGED TO
READ THE PROXY STATEMENT, REGISTRATION STATEMENT, PROSPECTUS AND
OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF
AND WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Any definitive
proxy statement (if and when available) will be mailed to
unitholders of Oiltanking Partners. Investors and security holders
will be able to obtain free copies of these documents (if and when
available) and other documents filed with the SEC by Enterprise
and/or Oiltanking Partners through the web site maintained by the
SEC at http://www.sec.gov.
Enterprise, Oiltanking Partners and their respective general
partners, and the directors and certain of the executive officers
of the respective general partners, may be deemed to be
participants in the solicitation of proxies from the unitholders of
Oiltanking Partners in connection with the proposed merger.
Information about the directors and executive officers of the
respective general partners of Enterprise and Oiltanking Partners
is set forth in each company’s Annual Report on Form 10-K for the
year ended December 31, 2013, filed with the SEC on March 3, 2014
and February 25, 2014, respectively. These documents can be
obtained free of charge from the sources listed above. Other
information regarding the person who may be “participants” in the
proxy solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be
filed with the SEC when they become available.
Enterprise Products Partners L.P.Randy Burkhalter, 713-381-6812
or 866-230-0745Investor RelationsorRick Rainey, 713-381-3635Media
Relations
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